United States International Trade Commission

Investigation No. 332-524

USITC Publication 4310

April 2012

Brazil: Competitive 

Factors in Brazil 

Affecting U.S. and 

Brazilian Agricultural 

Sales in Selected Third 

Country Markets
Address all communications to 

Secretary to the Commission 

United States International Trade Commission 

Washington, DC 20436

U.S. International Trade Commission

Robert B. Koopman

Acting Director, Office of Operations

Karen Laney

Director, Office of Industries

COMMISSIONERS 

 

Deanna Tanner Okun, Chairman 

Irving A. Williamson, Vice Chairman 

Daniel R. Pearson 

Shara L. Aranoff 

Dean A. Pinkert 

David S. Johanson
U.S. International Trade Commission

Washington, DC 20436 

www.usitc.gov

Publication 4310 April 2012

Brazil: Competitive Factors in Brazil 

Affecting U.S. and Brazilian Agricultural 

Sales in Selected Third Country Markets

Investigation No. 332-524
Project Leaders

John Fry

john.fry@usitc.gov

Deputy Project Leader

Brendan Lynch

brendan.lynch@usitc.gov

Office of Industries

Brian Allen, Katherine Baldwin, Laura Bloodgood, Joanna Bonarriva, Shannon Gaffney,

John Giamalva, Michael McConnell, Douglas Newman, Alison Rozema,

Alan Treat, and Marin Weaver

Office of Economics

Caitlyn Carrico, Justino De La Cruz, Jose Signoret, Danielle Trachtenberg,

and Marinos Tsigas

Office of the General Counsel

William Gearhart

Content Reviewers

Katherine Linton and William Powers

Administrative Support

Phyllis Boone and Wanda Tolson

Office of Publishing

Sonya Wilson

Under the Direction of

Jonathan Coleman, Chief

Agriculture and Fisheries Division
i 

Abstract 

 This report describes and analyzes competitive factors in Brazil affecting U.S. and 

Brazilian sales of agricultural goods, including grains, soybeans, and meats, in 

third-country markets. It provides (a) an overview of Brazil’s agricultural imports, 

exports, consumption, and production during 2006–11; (b) an overview of Brazilian 

government programs and regulations relating to agricultural production and exports; 

(c) an analysis of the growth of Brazilian agribusiness firms and their impact on global 

supply chains; (d) a description of competitive factors affecting Brazil’s agricultural 

sector; and (e) special focus chapters surveying the soybean, grains, poultry, beef, and 

pork sectors, with an emphasis on important third-country markets where U.S. and 

Brazilian exports directly compete. The study also uses economic modeling to analyze 

the effects of the removal of tariff preferences within the Mercosul customs union, of 

which Brazil is a member, on U.S. agricultural exports, as well as the effects of certain 

nontariff measures (NTMs) in third-country markets on both Brazilian and U.S. exports. 

 Brazil’s agricultural exports have grown rapidly since 2000, coinciding with the increase 

in global demand for food and animal feed over the last decade. Exports are concentrated 

in a few major commodities, with soybeans, soybean meal and oil, sugar, and coffee 

accounting for more than 50 percent of Brazil’s total agricultural exports between 2006 

and 2011, and poultry and beef accounting for an additional 19 percent. 

 Our findings suggest that low on-farm production costs have helped to make Brazil a 

competitive exporter of soybeans, grains, and meats in recent years, despite significant 

challenges, such as inadequate transportation infrastructure, high interest rates, currency 

appreciation, and burdensome labor laws and tax structures. Brazilian exports are likely 

to grow more slowly in the current environment, particularly if rising domestic demand 

siphons Brazilian agricultural supplies from third-country markets. Nonetheless, 

Brazilian agricultural production and exports have the potential to continue growing 

significantly; large areas of untapped agricultural land remain, and research and 

development programs will likely foster improvements in production practices and yields 

in many agricultural sectors. 

iii 

CONTENTS 

Page

Abstract ................................................................................................................................... i

Acronyms and Abbreviations ................................................................................ xv

Executive Summary ....................................................................................................... xxi

Chapter 1 Introduction ............................................................................................. 1-1

 Scope of the report .............................................................................................................. 1-3

 Approach ............................................................................................................................. 1-5

 Recent history of Brazilian agricultural policies ................................................................. 1-6

 Analytical framework for competitive factors .................................................................... 1-8

 Delivered cost ................................................................................................................. 1-9

 Product differentiation ....................................................................................................1-11

 Reliability of supply ....................................................................................................... 1-11

 Bibliography ........................................................................................................................ 1-12

Chapter 2 Brazil’s Agricultural Production, Consumption, 

 and Trade ................................................................................................................... 2-1

 Overview ............................................................................................................................. 2-1

 Agricultural production ....................................................................................................... 2-3

 Regional farm characteristics ......................................................................................... 2-3

 General production patterns ........................................................................................... 2-5

 Recent production trends ................................................................................................ 2-7

 Oilseeds ...................................................................................................................... 2-7

 Grains ......................................................................................................................... 2-7

 Coffee ......................................................................................................................... 2-9

 Sugar .......................................................................................................................... 2-9

 Meats .......................................................................................................................... 2-10

 Cotton ......................................................................................................................... 2-10

 Oranges and orange juice ........................................................................................... 2-11

 Edible dry beans ......................................................................................................... 2-12

 Agricultural consumption ....................................................................................................2-12

 Recent consumption trends ............................................................................................. 2-14

 Agricultural trade ................................................................................................................ 2-15

 Exports ............................................................................................................................... 2-16

 Exports by product .........................................................................................................2-16

 Soybeans .................................................................................................................... 2-16

 Sugar and ethanol ....................................................................................................... 2-19

 Poultry ........................................................................................................................ 2-19

 Coffee ......................................................................................................................... 2-20

 Beef ............................................................................................................................ 2-20

 Corn ............................................................................................................................ 2-20

 Tobacco ...................................................................................................................... 2-20

 Exports to major trading partners ................................................................................... 2-21
iv

CONTENTS―Continued

Page

Chapter 2 Brazil’s Agricultural Production, Consumption, 

 and Trade—Continued

 Imports ................................................................................................................................ 2-22

 Imports by product .........................................................................................................2-22

 Grains ......................................................................................................................... 2-22

 Miscellaneous oils ...................................................................................................... 2-22

 Ethanol ....................................................................................................................... 2-24

 Horticultural products ................................................................................................ 2-24

 Imports from major trading partners .............................................................................. 2-24

 Brazil’s participation in preferential trade arrangements .................................................... 2-25

 Mercosul ......................................................................................................................... 2-25

 Other preferential trade arrangements ............................................................................ 2-26

 Bibliography ........................................................................................................................ 2-28

Chapter 3 Brazil’s Transportation Infrastructure and 

 Government Policies ....................................................................................... 3-1

 Transportation infrastructure ...............................................................................................3-1

 Overview ........................................................................................................................ 3-1

 Transportation infrastructure conditions in Brazil ......................................................... 3-3

 Roads ......................................................................................................................... 3-5

 Rail ............................................................................................................................ 3-9

 River transport ...........................................................................................................3-11

 Storage and warehouse capacity................................................................................ 3-12

 Ports ........................................................................................................................... 3-15

 Government programs to improve transportation infrastructure .................................... 3-18

 National Plan for Transportation and Logistics (NPTL) ........................................... 3-19

 Growth and Acceleration Program (PAC) ................................................................ 3-20

 The role of BNDES in transportation infrastructure development ............................ 3-21

 Other government policies affecting Brazil’s agricultural production and trade ................ 3-23

 Overview ........................................................................................................................ 3-23

 Brazil’s support for agriculture relative to other countries ............................................. 3-25

 Selected Brazilian government programs supporting agriculture .................................. 3-27

 Price support programs .............................................................................................. 3-27

 Government credit programs ...................................................................................... 3-31

 Tax policy .................................................................................................................. 3-36

 Research and development ......................................................................................... 3-38

 Environmental policies............................................................................................... 3-40

 Insurance programs .................................................................................................... 3-42

 Bibliography ........................................................................................................................ 3-43

Chapter 4 Competitive Factors Affecting Brazil’s 

 Agricultural Sector and Exports ............................................................. 4-1

 Overview ............................................................................................................................. 4-1

 Primary factors affecting Brazil’s agricultural sector ......................................................... 4-2
v

CONTENTS―Continued

Page

Chapter 4 Competitive Factors Affecting Brazil’s 

 Agricultural Sector and Exports—Continued

 Factors affecting delivered cost ...................................................................................... 4-4

 Natural endowments .................................................................................................. 4-4

 Agricultural research and development ..................................................................... 4-4

 Industry structure ....................................................................................................... 4-6

 Production methods .................................................................................................... 4-6

 Input costs .................................................................................................................. 4-10

 Financing .................................................................................................................... 4-15

 Exchange rate .............................................................................................................4-16

 Factors affecting product differentiation ........................................................................ 4-18

 Customer-oriented production ................................................................................... 4-19

 Environmentally and socially sustainable production ................................................ 4-20

 Factors affecting reliability of export supply ................................................................. 4-21

 Rising domestic demand ............................................................................................ 4-22

 Land available for agricultural expansion .................................................................. 4-22

 Livestock diseases ...................................................................................................... 4-24

 Bibliography ........................................................................................................................ 4-25

Chapter 5 The Role of Brazilian Agribusiness in the Global 

 Food Supply Chain ............................................................................................. 5-1

 Overview ............................................................................................................................. 5-1

 How Brazilian agribusinesses decide to enter global supply chains ................................... 5-3

 Government policies toward agribusiness in Brazil ............................................................ 5-7

 Agribusiness in Brazil’s beef and poultry industries ........................................................... 5-10

 JBS ................................................................................................................................ 5-14

 Marfrig ........................................................................................................................... 5-14

 Brasil Foods ................................................................................................................... 5-16

 Agribusiness in Brazil’s soybean industry .......................................................................... 5-18

 Grupo Bom Futuro ......................................................................................................... 5-21

 Bibliography ........................................................................................................................ 5-24

Chapter 6 Soybeans ....................................................................................................... 6-1

 Overview ............................................................................................................................. 6-1

 Global trade in soybeans ..................................................................................................... 6-3

 Brazilian production, consumption, and trade ..................................................................... 6-4

 Industry structure ................................................................................................................. 6-7

 Regional production and processing .............................................................................. 6-7

 Farm size and ownership ............................................................................................... 6-8

 Primary factors affecting competitiveness .......................................................................... 6-9

 Cost of production ......................................................................................................... 6-9

 Transportation costs .......................................................................................................6-11

 Agricultural research ..................................................................................................... 6-15

 Tax system ..................................................................................................................... 6-16

 Non-GM seed and traceability ....................................................................................... 6-17
vi

CONTENTS―Continued

Page

Chapter 6 Soybeans—Continued

 Key export markets ............................................................................................................. 6-19

 China .............................................................................................................................. 6-19

 Market characteristics ................................................................................................. 6-19

 Consumption patterns and preferences ....................................................................... 6-20

 Competition with the United States ............................................................................ 6-21

 European Union .............................................................................................................6-22

 Market characteristics ................................................................................................. 6-22

 Consumption patterns and preferences ....................................................................... 6-22

 Competition with the United States ............................................................................ 6-24

 Japan .............................................................................................................................. 6-25

 Market characteristics ................................................................................................. 6-25

 Consumption patterns and preferences ....................................................................... 6-27

 Competition with the United States ............................................................................ 6-28

 Bibliography ........................................................................................................................ 6-30

Chapter 7 Grains ............................................................................................................ 7-1

 Overview ............................................................................................................................. 7-1

 Corn ..................................................................................................................................... 7-1

 Global trade in corn .......................................................................................................7-1

 The Brazilian corn industry ........................................................................................... 7-2

 Brazilian production, consumption, and trade ............................................................... 7-3

 Industry structure ........................................................................................................... 7-6

 Farm and industry organization .................................................................................. 7-6

 Regional production ................................................................................................... 7-7

 Two-harvest production system ................................................................................. 7-8

 Primary factors affecting competitiveness ..................................................................... 7-9

 Cost of production ...................................................................................................... 7-10

 Land expansion and improvement of farm-level inputs ............................................. 7-11

 Interaction with the livestock sector ........................................................................... 7-12

 Prices .......................................................................................................................... 7-13

 Infrastructure .............................................................................................................. 7-14

 Government policies ................................................................................................... 7-15

 Key export markets ........................................................................................................ 7-16

 EU-27 ......................................................................................................................... 7-16

 Japan ........................................................................................................................... 7-17

 Taiwan ........................................................................................................................ 7-18

 Colombia .................................................................................................................... 7-20

 Wheat .................................................................................................................................. 7-21

 Industry overview ..........................................................................................................7-21

 Brazilian production, consumption, and trade ............................................................ 7-22

 Regional summary and industry structure .................................................................. 7-25

 Primary factors affecting competitiveness ..................................................................... 7-25

 Cost of production ...................................................................................................... 7-25

 Government policies ................................................................................................... 7-26

 Key export markets ........................................................................................................ 7-27

 Bibliography ...................................................................................................................... 7-29
vii

CONTENTS―Continued

Page

Chapter 8 Poultry 8-1

 Overview ........................................................................................................................... 8-1

 Brazilian production, consumption, and trade ................................................................... 8-2

 Industry structure ............................................................................................................... 8-4

 Primary factors affecting competitiveness ......................................................................... 8-9

 Cost of production ......................................................................................................... 8-10

 Product differentiation ................................................................................................... 8-13

 Specialized production and packaging ..................................................................... 8-14

 Government action to improve market access ............................................................... 8-16

 Key export markets ............................................................................................................ 8-16

 China and Hong Kong ................................................................................................... 8-17

 Market characteristics .............................................................................................. 8-17

 Government policies affecting trade ........................................................................ 8-19

 Competition with the United States ......................................................................... 8-20

 Russia ............................................................................................................................ 8-21

 Market characteristics .............................................................................................. 8-21

 Government policies affecting trade ........................................................................ 8-22

 Competition with the United States ......................................................................... 8-25

 Japan ............................................................................................................................ 8-26

 Market characteristics .............................................................................................. 8-26

 Government policies affecting trade ........................................................................ 8-27

 Competition with the United States ......................................................................... 8-27

 Saudi Arabia .................................................................................................................. 8-29

 Market characteristics .............................................................................................. 8-29

 Government policies affecting trade ........................................................................ 8-30

 Competition with the United States ......................................................................... 8-31

 Bibliography ...................................................................................................................... 8-33

Chapter 9 Beef ................................................................................................................... 9-1

 Overview .............................................................................................................................. 9-1

 Brazilian production, consumption, and trade ....................................................................... 9-3

 Production in Brazil ......................................................................................................... 9-3

 Trade ................................................................................................................................ 9-4

 Primary factors affecting competitiveness ............................................................................ 9-6

 Costs of production .......................................................................................................... 9-6

 Efficiency ......................................................................................................................... 9-8

 Product characteristics .......................................................................................... 9-10

 Disease ............................................................................................................................. 9-10

 Transportation infrastructure ........................................................................................... 9-11

 Competitive position with the United States ................................................................... 9-11

 Key export markets ................................................................................................................ 9-12

 Russia .............................................................................................................................. 9-12

 Export volume ............................................................................................................ 9-12

 Export composition .................................................................................................... 9-13

 Import restrictions ...................................................................................................... 9-14

 Competition with the United States ............................................................................ 9-15
viii

CONTENTS―Continued

Page

Chapter 9 Beef—Continued

 EU-27 .............................................................................................................................. 9-15

 Export volume ............................................................................................................ 9-15

 Export composition .................................................................................................... 9-16

 Import restrictions ...................................................................................................... 9-16

 Tariff-rate quotas ........................................................................................................9-18

 Competition with the United States ............................................................................ 9-19

 Hong Kong and China ..................................................................................................... 9-19

 Volume of exports ...................................................................................................... 9-19

 Export composition .................................................................................................... 9-19

 Competition with the United States ............................................................................ 9-20

 Egypt ................................................................................................................................ 9-21

 Export volume ............................................................................................................ 9-21

 Competition with the United States ............................................................................ 9-22

 Bibliography .......................................................................................................................... 9-24

Chapter 10 Pork .............................................................................................................. 10-1

 Overview .............................................................................................................................. 10-1

 Brazilian production, consumption, and trade ....................................................................... 10-2

 Industry structure ............................................................................................................. 10-3

 Regional production ......................................................................................................... 10-3

 Consumption .................................................................................................................... 10-4

 Trade ................................................................................................................................ 10-5

 Primary factors affecting competitiveness ............................................................................ 10-5

 Efficiency ......................................................................................................................... 10-5

 Cost of production ........................................................................................................... 10-7

 Exchange rate ................................................................................................................... 10-9

 Disease ............................................................................................................................. 10-10

 Transportation infrastructure ........................................................................................... 10-11

 Government support ........................................................................................................ 10-11

 Competitive position with the United States ................................................................... 10-12

 Key exports markets .............................................................................................................. 10-13

 Russia .............................................................................................................................. 10-13

 Export volume ............................................................................................................ 10-13

 Brazil’s export composition ....................................................................................... 10-14

 Russia’s import restrictions ........................................................................................ 10-15

 Competition with the United States ............................................................................ 10-16

 Hong Kong and China ..................................................................................................... 10-16

 Export volume ............................................................................................................ 10-16

 Brazil’s export composition ....................................................................................... 10-17

 Hong Kong’s import restrictions ................................................................................ 10-17

 Competition with the United States ............................................................................ 10-18

 Ukraine ............................................................................................................................ 10-18

 Export volume ............................................................................................................ 10-18

 Brazil’s export composition ....................................................................................... 10-19

 Ukraine’s import restrictions ...................................................................................... 10-19

 Competition with the United States ............................................................................ 10-20
ix

CONTENTS―Continued

Page

Chapter 10 Pork—Continued

 Argentina ......................................................................................................................... 10-20

 Export volume ............................................................................................................ 10-20

 Import restrictions ...................................................................................................... 10-21

 Competition with the United States ............................................................................ 10-21

 Angola .............................................................................................................................. 10-21

 Export volume ............................................................................................................ 10-21

 Export composition .................................................................................................... 10-22

 Import restrictions ...................................................................................................... 10-23

 Competition with the United States ............................................................................ 10-23

 Bibliography .......................................................................................................................... 10-24

Chapter 11 Estimated Effects of Nontariff Measures and 

 Brazil’s Preferential Tariffs .......................................................................... 11-1

 Overview ............................................................................................................................... 11-1

 Simulated effects of nontariff measures affecting U.S. and Brazilian exports ...................... 11-3

 All focus products considered together ........................................................................... 11-4

 Corn ................................................................................................................................. 11-5

 Wheat ............................................................................................................................... 11-6

 Beef products ................................................................................................................... 11-6

 Pork products ................................................................................................................... 11-8

 Poultry products .............................................................................................................. 11-9

 Simulated effects of preferential tariffs negotiated under Brazil’s free trade agreements .... 11-11

 Bibliography .......................................................................................................................... 11-19

Appendixes 

A. Request letters .......................................................................................................................... A-1

B. Federal Register notice ............................................................................................................ B-1

C. Summary of views of interested parties ................................................................................... C-1

D. Brazilian agribusiness additional information .......................................................................... D-1

E. Modeling analytical framework and assumptions .................................................................... E-1

Boxes 

3.1. Overview of agricultural export routes in Brazil.................................................................. 3-4

3.2. Port reforms and investments in Brazil ................................................................................ 3-17

3.3. Agricultural agencies, policy objectives, and budgets ......................................................... 3-28

4.1. Foreign direct investment (FDI) in Brazil’s agricultural sector ........................................... 4-2

4.2. The “Brazil cost” in Brazilian agriculture ............................................................................ 4-5

4.3. Do longer GM seed approval times in the United States disadvantage U.S. firms? ............ 4-8

4.4. Legal limits on foreign land ownership in Brazil ................................................................. 4-12

4.5. In Brazil, farmers can use sacks of soybeans and corn in lieu of cash payments ................ 4-16

5.1. Public-private partnerships with Embrapa ........................................................................... 5-11

5.2. Concept and background: Agricultural and livestock cooperatives ..................................... 5-20

6.1. Argentina’s differential export tax ....................................................................................... 6-26

8.1. The rise in global feed prices ............................................................................................... 8-12

9.1. Hides and leather production and exports ............................................................................ 9-5

10.1. Availability of feed impacts swine and poultry production ................................................. 10-8
x 

CONTENTS―Continued

Page

Figures

1.1. Brazilian states can be grouped into five regions ................................................................. 1-7

1.2. A broad range of factors affect competitiveness in agricultural markets ............................. 1-10

2.1. The cerrado region comprises nearly one-quarter of Brazil’s total area .............................. 2-2

2.2. Brazil’s crop production extends countrywide and includes many commodities 

 besides corn and soybeans ............................................................................................... 2-6

2.3. Brazil’s agricultural exports are concentrated in a few major products, 2011 ..................... 2-17

3.1. Soybean export routes are beginning to shift towards northern Brazil ................................ 3-4

3.2. Expansion of the BR-163 highway is intended to reduce congestion .................................. 3-8

3.3. Current and future railroad development may lower transport costs ................................... 3-11

3.4. Primary Brazilian waterway export routes ........................................................................... 3-13

3.5. Ports in Brazil ....................................................................................................................... 3-16

4.1. Competitive factors affecting Brazil’s agricultural exports have both positive and 

 negative effects ................................................................................................................ 4-3

4.2. The U.S.-Brazil nominal exchange rate, January 2002–November 11, shows the 

 real’s appreciation ........................................................................................................... 4-17

5.1. The global agribusiness supply chain as viewed by Brazil .................................................. 5-3

5.2. Participation options for FDI in Brazilian agribusiness ....................................................... 5-5

5.3. BRF’s integrated, energy self-sufficient pork and poultry processing plant ........................ 5-18

6.1. The United States and Brazil continued to dominate the global supply of soybeans 

 in 2011 ............................................................................................................................. 6-6

7.1. Brazilian corn harvest area and yield, MY 2000/2001–2010/11 ......................................... 7-4

7.2. Mato Grosso corn production, 2003–10 ............................................................................... 7-8

7.3. Export growth compared to monthly prices in Brazil, January 2006–October 2011 ........... 7-14

7.4. Brazilian wheat production and yields, MY 2000/2001–2010/11 ....................................... 7-22

8.1. Brazil and the United States largely exported broilers to different markets in 2011 .......... 8-5

8.2. The United States and Brazil have similar vertically integrated broiler production and 

 marketing processes ........................................................................................................ 8-7

8.3. Russia’s poultry TRQ has been falling since 2008 ............................................................... 8-24

9.1. Brazil and the United States largely exported beef to different countries in 2011 ............. 9-2

10.1. Competition between U.S. and Brazilian pork exports in 2011 was limited by sanitary 

 restrictions on Brazilian exports ...................................................................................... 10-6

11.1. The extent of bilateral tariff preferences at the sector level between Brazil and its 

 Mercosul trading partners for 2010 ................................................................................. 11-17

Tables 

ES.1. Brazil and the United States: Comparative statistics related to agricultural trade, 2011 ...... xxi

ES.2. Simulated effects of the removal of beef, pork, poultry, corn, and wheat NTMs ............... xxx

1.1. Brazil and the United States: Comparative statistics related to agricultural trade, 2011 ..... 1-3

1.2. Comparison of report chapters to SFC request letter ........................................................... 1-4

2.1. Brazil: Agricultural production of selected products, marketing years (MY) 

 2006/07–2010/11 ............................................................................................................. 2-8

2.2. Brazil: Agricultural consumption of selected products, MY 2006/07–2010/11 ................... 2-13

2.3. Brazil and the United States: Agricultural trade balance, 2006–11 ...................................... 2-16

2.4. Brazil: Agricultural exports by product group, 2006–11 ..................................................... 2-18

2.5. Brazil: Agricultural exports to major trading partners, 2006–11 ......................................... 2-21

2.6. Brazil: Agricultural imports by product group, 2006–11 ..................................................... 2-23

2.7. Brazil: Agricultural imports from major trading partners, 2006–11 .................................... 2-25

2.8. Overview of selected Mercosul trade agreements, completed and in negotiation................ 2-27
xi

CONTENTS―Continued

Page

Tables 

3.1. NPTL investment by phase, 2008–23 .................................................................................. 3-19

3.2. NPTL allocations by transport mode, 2008–23 .................................................................... 3-20

3.3. NPTL investments by logistics vector and transport mode .................................................. 3-20

3.4. BNDES investments in infrastructure projects, 2010–13 ..................................................... 3-22

3.5. Examples of BNDES investments in transport projects ....................................................... 3-23

3.6. Brazilian agricultural policy development, 1965–2005 ....................................................... 3-24

3.7. Effects of selected Brazilian government agricultural policies on export 

 competitiveness ................................................................................................................. 3-26

3.8. OECD agricultural support estimates, by type and by selected countries, 2006–10 ............ 3-27

3.9. CONAB price support programs for corn, rice and wheat, 2006–10 ................................... 3-29

3.10. Selected Brazilian taxes ........................................................................................................ 3-37

4.1. Brazil’s market price of soybean exports, 2006–11 ............................................................. 4-18

5.1. Estimated number of outbound Brazilian agribusiness investment projects in the 

 meat, grain, and soybean sectors, 2003–11 ....................................................................... 5-6

5.2. Estimated number of inbound agribusiness investment projects in the Brazilian meat, 

 grain, and soybean sectors, 2003–11 ................................................................................ 5-7

5.3. Selected JBS mergers and acquisitions ................................................................................ 5-15

5.4. Marfrig Alimentos SA: Principal operating units................................................................. 5-16

5.5. Brasil Foods: Domestic sales, exports, and total sales, by product, 2010 ............................ 5-17

6.1. Soybeans: Production, consumption, and trade, selected producers and markets, 

 marketing year (MY) 2010/11 .......................................................................................... 6-2

6.2. Soybean meal: Production, consumption, and trade, selected producers and markets, 

 MY 2010/11 ...................................................................................................................... 6-2

6.3. Soybean oil: Production, consumption, and trade, selected producers and markets, 

 MY 2010/11 ...................................................................................................................... 6-2

6.4. Brazil: Soybean production, consumption, exports, and imports, MY 2006/07– 

 2010/11 ............................................................................................................................. 6-4

6.5. Brazil: Soybean exports to selected markets, 2006–11 ........................................................ 6-7

6.6. Brazil: Soybean production by region, 2006–10 .................................................................. 6-8

6.7. Soybeans: Average 2010 costs of production at various R$/$ exchange rates ..................... 6-10

6.8. Brazil and the United States: Domestic transportation cost share of soybeans at the 

 port, 2006–10, 2Q 2010 and 2Q 2011 ............................................................................... 6-13

6.9. Brazil and the United States: Ocean freight rates for shipping soybeans to Hamburg, 

 Germany, 2006–10, 2Q 2010 and 2Q 2011 ...................................................................... 6-13

6.10. Brazil and the United States: Ocean freight rates for shipping soybeans to Shanghai, 

 China, 2006–10, 2Q 2010 and 2Q 2011............................................................................ 6-13

6.11. Brazil and the United States: Landed costs of soybeans in Hamburg, Germany, 

 2006–10, 2Q 2010 and 2Q 2011 ....................................................................................... 6-14

6.12. Brazil and the United States: Landed costs of soybeans in Shanghai, China, 

 2006–10, 2Q 2010 and 2Q 2011 ....................................................................................... 6-14

6.13. China: Soybean imports, by supplier, 2006–11 .................................................................... 6-20

6.14. China: Soybeans production, consumption, exports, and imports, MY 2006/07– 

 2010/11 ............................................................................................................................. 6-21
xii

CONTENTS―Continued

Page

Tables—Continued

6.15. EU-27: Soybean imports, by supplier, 2006–10 ................................................................. 6-23

6.16. EU-27: Soybean production, consumption, exports, and imports, MY 2006/07– 

 2010/11 .......................................................................................................................... 6-24

6.17. Japan: Soybean imports, by supplier, 2006–11 .................................................................. 6-27

6.18. Japan: Soybean production, consumption, exports, and imports, MY 2006/07– 

 2010/11 .......................................................................................................................... 6-28

7.1. Brazil: Corn production, consumption, exports, and imports, marketing years (MY) 

 2006/07–2010/11 ........................................................................................................... 7-2

7.2. Corn: Production, consumption, and trade, selected producers and markets, 2010/11 ...... 7-3

7.3. World corn production, MY 2006/07–2010/11 .................................................................. 7-4

7.4. Brazil: Corn exports to selected markets, 2006–11 ............................................................ 7-6

7.5. Brazil: Corn production by region, 2006–10 ...................................................................... 7-8

7.6. Corn: Average 2010/11 costs of production at various R$/$ exchange rates ..................... 7-10

7.7. EU-27: Corn production, consumption, exports, and imports, MY 2006/07–2010/11 ...... 7-16

7.8. EU-27: Corn imports, by supplier, 2006–11 ...................................................................... 7-17

7.9. Japan: Corn production, consumption, exports, and imports, MY 2006/07–2010/11 ........ 7-17

7.10. Japan: Corn imports, by supplier, 2006–11 ........................................................................ 7-18

7.11. Taiwan: Corn production, consumption, exports, and imports, MY 2006/07–2010/11...... 7-19

7.12. Taiwan: Corn imports, by supplier, 2006–11 ............................................................................ 7-19

7.13. Colombia: Corn production, consumption, exports, and imports, MY 2006/07– 

 2010/11 .......................................................................................................................... 7-20

7.14. Colombia: Corn imports, by supplier, 2006–11 ................................................................. 7-21

7.15. Brazil: Wheat production, consumption, exports, and import, MY 2006/07–2010/11 ...... 7-22

7.16. Brazil: Wheat imports, by supplier, 2006–11 ........................................................................... 7-24

7.17. Brazil: Wheat exports to selected markets, 2006–11 .......................................................... 7-24

7.18. Brazil: Wheat production by state, 2006–10 ...................................................................... 7-25

7.19. Wheat: Average 2010/11 costs of production at various R$/$ exchange rates .................... 7-26

8.1. Broiler meat: Production, consumption, and trade, selected producers and markets, 

 2011 ............................................................................................................................... 8-2

8.2. Brazil: Broiler meat production, consumption, exports and imports, 2006–11 .................. 8-2

8.3. Brazil: Broiler exports to selected markets, 2006–11 ......................................................... 8-4

8.4. Brazil: Flock size by region and top six producing states, various years ........................... 8-6

8.5. Live broilers: Average costs of production at various R$/$ exchange rates, mid-year 

 2011 ............................................................................................................................... 8-11

8.6. China and Hong Kong: Broiler meat production, consumption, exports and imports, 

 2006–11 ......................................................................................................................... 8-17

8.7. China and Hong Kong: Broiler meat imports, by supplier, 2006–11 ................................. 8-18

8.8. Russia: Broiler meat production, consumption, exports and imports, 2006–11 ................. 8-22

8.9. Russia: Broiler meat imports, by supplier, 2006–10 .......................................................... 8-22

8.10. Japan: Broiler meat production, consumption, exports, and imports, 2006–11 ................. 8-26

8.11. Japan: Broiler meat imports, by supplier, 2006–11 ............................................................ 8-27

8.12. Saudi Arabia: Broiler meat production, consumption, exports and imports, 2006–11 ....... 8-29

8.13. Saudi Arabia: Broiler meat imports, by supplier, 2006–10 ................................................ 8-30

9.1. Beef: Production, consumption, and trade, selected producers and markets, 2011 ............ 9-3

9.2. Brazil: Beef production, supply, and distribution, 2006–11 ............................................... 9-6

 
xiii

CONTENTS―Continued

Page

Tables—Continued

9.3. Brazil: Beef exports to selected markets, 2006–11 ............................................................ 9-12

9.4. Russia: Beef production, supply, and distribution, 2006–11 .............................................. 9-13

9.5. Russia: Beef imports, by supplier, 2006–10 ....................................................................... 9-13

9.6. Brazil: Beef exports to Russia, 2006–11 ............................................................................ 9-14

9.7. Allocations of frozen beef (HS 0202) imports under Russia’s TRQ system, 2007–11 ...... 9-15

9.8. EU-27: Beef production, supply, and distribution, 2006–11 .............................................. 9-16

9.9. Brazil: Beef exports to the EU-27, 2006–11 ...................................................................... 9-16

9.10. EU-27: Beef imports, by supplier, 2006–11 ....................................................................... 9-17

9.11. China and Hong Kong: Beef production, supply, and distribution, 2006–11 .................... 9-20

9.12. Brazil: Beef exports to China and Hong Kong, 2006–11 ................................................... 9-20

9.13. China and Hong Kong reported beef imports, 2006–11 ..................................................... 9-21

9.14. Egypt: Beef production, supply, and distribution, 2006–11 ............................................... 9-22

9.15. Egypt: Beef imports, by supplier, 2006–10 ........................................................................ 9-22

9.16. Brazil: Beef exports to Egypt, 2006–11 ............................................................................. 9-23

10.1. Pork: Production, consumption, and trade, selected producers and markets, 2011 ............ 10-2

10.2. Brazil: Swine and pork production, supply, and distribution, 2006–11 ............................. 10-2

10.3. Export share by region ........................................................................................................ 10-4

10.4. Swine: Average costs of production in Santa Catarina and Mato Grosso Brazil, 

 2006–10 ......................................................................................................................... 10-8

10.5. Swine: Average 2010 costs of production per kilogram of weight gain ............................ 10-9

10.6. Swine: Average 2010 costs of production using hypothetical R$/$ exchange rates .......... 10-10

10.7. Brazil’s pork exports to selected markets, 2006–11 ........................................................... 10-13

10.8. Russia: Pork production, supply, and distribution, 2006–11 .............................................. 10-14

10.9. Russia: Pork imports, by supplier, 2006–11 ....................................................................... 10-14

10.10. Russia: Within-quota TRQ volumes for pork, 2006–11 ..................................................... 10-15

10.11. Hong Kong: Pork production, supply, and distribution, 2006–11 ...................................... 10-16

10.12. Hong Kong: Pork imports, by supplier, 2006–11 ............................................................... 10-17

10.13. Ukraine: Pork production, supply, and distribution, 2006–11 ............................................ 10-19

10.14. Ukraine: Pork imports, by supplier, 2006–10 ..................................................................... 10-19

10.15. Argentina: Pork production, supply, and distribution, 2006–11 ........................................ 10-20

10.16. Argentina: Pork imports, by supplier, 2006–10 ................................................................. 10-21

10.17. Angola: Pork production, supply, and distribution, 2006–11 ............................................. 10-22

10.18. Angola: Pork imports, by supplier, 2006–10 ...................................................................... 10-22

11.1. Products and markets used in the NTM simulation analysis .............................................. 11-4

11.2. Simulated effects of the removal of corn, wheat, beef, pork, and poultry NTMs .............. 11-5

11.3. Simulated effects of the removal of corn NTMs and estimated AVEs of known corn 

 NTMs ............................................................................................................................. 11-6

11.4. Simulated effects of the removal of wheat NTMs and estimated AVEs of known 

 wheat NTMs .................................................................................................................. 11-7

11.5. Simulated effects of the removal of beef NTMs and estimated AVEs of known beef 

 NTMs ............................................................................................................................ 11-8

11.6. Simulated effects of the removal of pork NTMs and estimated AVEs of known pork 

 NTMs ............................................................................................................................. 11-9

11.7. Simulated effects of the removal of poultry NTMs and estimated AVEs of known 

 poultry NTMs ................................................................................................................ 11-10

11.8. United States food and agricultural exports to Brazil and to the rest-of-Mercosul: 2010 

 trade and simulated trade effects of removing Brazilian bilateral tariff preferences ..... 11-12
xiv

CONTENTS―Continued

Page

Tables—Continued

11.9. United States food and agricultural trade with the world: 2010 trade and simulated 

 trade effects of removing Brazilian bilateral tariff preferences ..................................... 11-13

11.10. Brazilian food and agricultural trade with the world: 2010 trade and simulated trade 

 effects of removing Brazilian bilateral tariff preferences .............................................. 11-14

11.11. Rest-of-Mercosul food and agricultural trade with the world: 2010 trade and 

 simulated trade effects of removing Brazilian bilateral tariff preferences .................... 11-15

D.1. Selected agribusiness companies in Brazil’s meat and grains industries, 2011 ................. D-3

D.2. Inbound FDI in Brazil’s meat, oilseed, and grain sectors ................................................... D-5

D.3. Outbound FDI by Brazilian meat, grains, and oilseeds companies .................................... D-12

E.1. Regions used in applied general equilibrium simulation model ......................................... E-4

E.2. Sectors in the applied general equilibrium simulation model............................................. E-5

E.3. Concordance between food and agricultural products in the simulation model and 

 the HS 6-digit items contained in each product group ................................................... E-5

E.4. Set of products and markets considered for the NTM simulation analysis ........................ E-9

E.5. Estimated ad valorem equivalents of known NTMs ........................................................... E-10

 
xv

ACRONYMS AND ABBREVIATIONS 

ABC Agricultura de Baixo Carbono (Low Carbon Agriculture) program 

ABCS Associação Brasileira de Criadores de Suínos (Brazilian Association of Swine 

Producers) 

ABEF Associação Brasileira dos Produtores e Exportadores de Frangos (Brazilian 

Chicken Producers and Exporters Association) 

ABIOVE Associação Brasileira das Indústrias de Óleos Vegetais (Brazilian Vegetable Oil 

Industry Association) 

ABIPECS Associação Brasileira da Indústria Produtora e Exportadora de Carne Suína 

(Brazilian Pork Industry and Exporter Association) 

AD antidumping 

ADM Archer Daniels Midland 

AGF Aquisição do Governo Federal (Federal Government Purchasing) 

AGRAER Agência de Desenvolvimento Agrário e Extensão Rural (Agricultural 

Development and Extension Agency) 

AGU Advogado-Geral da União (Federal Solicitor General) 

AI artificial insemination 

AI avian influenza 

ALL America Latína Logística (transportation conglomerate) 

AMI American Meat Institute 

AMS aggregate measurement of support 

ANEC Associação Nacional dos Exportadores de Cereais (Brazilian Grain Exporters 

Association) 

ANP Agência Nacional do Petróleo, Gás Natural e Biocombustíveis (National Agency 

for Petroleum, Natural Gas and Biofuel) 

ANTT Agência Nacional de Transportes Terrestres (National Agency for Land 

Transportation) 

ANTAQ Agência Nacional de Transportes Aquaviários (National Agency for Waterway 

Transportation) 

APTA Agência Paulista de Tecnologia dos Agronegócios (São Paulo Agency for 

Agribusiness Technology) 

ARF Automatic Registration Forms 

ARS Agricultural Research Service (USDA) 

AUVs average unit values 

BCB Banco Central do Brasil (Central Bank of Brazil) 

BNDES Banco Nacional de Desenvolvimento Econômico e Social (Brazil National Social 

and Economic Development Bank) 

BNDESPAR BNDES Participações (a business corporation that is an integral subsidiary of the 

BNDES) 

BOVESPA BM&F BOVESPA (the principal Brazilian stock market) 

BRF Brasil Foods (second-largest Brazilian food company) 

BSE bovine spongiform encephalopathy (“mad cow” disease) 

CARICOM Caribbean Community and Common Market 

CDCA Certificado de Direitos Creditórios do Agronegócio (Agribusiness Credit Rights 

Certificate) 

CDIAL Centro de Divulgação do Islam para a América Latina (Center for Islamic 

Information in Latin America) 

CEPEA Centro de Estudos Avançados em Economia Aplicada (Center for Advanced 

Studies on Applied Economics) 
xvi

ACRONYMS AND ABBREVIATIONS—

Continued

CIBAL Central Islâmica Brasileira de Alimentos Halal (Brazilian Islamic Center for Halal 

Food) 

CIF cost, insurance and freight 

CLQs chicken leg quarters 

CNA Confederação da Agricultura e Pecuária do Brasil (Agriculture and Livestock 

 Confederation of Brazil) 

CNBS Conselho Nacional de Biossegurança (National Biosafety Council) 

CNT Confederação Nacional do Transporte (National Transportation Confederation) 

CONAB Companhia Nacional de Abastecimento (National Food Supply Company) 

 (Ministry of Agriculture) 

CONSEPA Conselho Nacional dos Sistemas Estaduais de Pesquisa Agropecuária 

COP cost of production 

CPI Consumer Price Index 

CRA certificado de recebíveis do agronegócio (agribusiness receivables certificate) 

CRH cédula rural hipotecária (rural mortgage note)

CRP cédula rural pignoratíca (rural pledging note)

CSE consumer support estimate (OECD) 

CTNBio Comissão Técnica Nacional de Biossegurança (National Technical Commission on 

 Biosafety) 

CVD countervailing duties 

DET differential export tax

DGSANCO Directorate-General for Health and Consumers (EU) 

DIPAP Divisão de Pesquisa Agropecuária (Agricultural Research Division) 

DNIT Departamento Nacional de Infra-Estrutura de Transportes (National Department of 

 Transportation Infrastructure) 

DNPEA Departamento Nacional de Pesquisa e Experimentação Agrícola (National 

Agricultural Research and Experimentation Department) 

Doux Frangosul Doux Frangosul S.A. Agro Avicola Industrial 

EBDA Empresa Baiana de Desenvolvimento Agrícola (Bahía Agricultural Development 

 Corporation) 

EC European Commission 

EGF Empréstimo do Governo Federal (federal marketing credit program) 

EIU Economist Intelligence Unit 

EMATER–GOA Empresa de Assistência Técnica e Extensão Rural do Estado de Goiás (Goiás State 

 Technical Assistance and Rural Extension Corporation) 

Embrapa Empresa Brasileira de Pesquisa Agropecuária (Brazilian Agricultural Research 

 Corporation) 

EMDAGRO Empresa de Desenvolvimento Agropecuário de Sergipe (Sergipe Agricultural 

 Development Corporation) 

EMEPA Empresa Estadual de Pesquisa Agropecuária da Paraíba (Paraíba State Agricultural 

 Research Corporation) 

EMPAER–MT Empresa Mato-grossense de Pesquisa, Assistência e Extensão Rural (Mato Grosso 

State Corporation for Agricultural Research, Technical Assistance, and Rural 

Extension) 

EMPARN Empresa de Pesquisa Agropecuária do Rio Grande do Norte (Rio Grande do Norte 

Agricultural Research Corporation) 

 

 
xvii

ACRONYMS AND ABBREVIATIONS—

Continued

EPAGRI Empresa de Pesquisa Agropecuária e Extensão Rural de Santa Catarina (Santa 

Catarina Agricultural Research and Rural Extension Corporation) 

EPAMIG Empresa de Pesquisa Agropecuária de Minas Gerais (Minas Gerais Agricultural 

Research Corporation) 

ERS Economic Research Service (USDA) 

EU; EU-27 European Union; the EU in its current membership status (27 members) 

FAO Food and Agriculture Organization of the United Nations 

FAPRI Food and Agricultural Policy Research Institute (U.S.) 

FAS Foreign Agricultural Service (USDA) 

FDI foreign direct investment 

FECOTRIGO Federação das Cooperativas de Trigo e Soja do Rio Grande do Sul (Rio Grande do 

Sul Federation of Wheat and Soy Cooperatives) 

FEPAGRO Fundação Estadual de Pesquisa Agropecuária (State Agricultural Research 

Foundation) 

FIESP Federação das Indústrias do Estado de São Paulo (São Paulo State Federation of 

Industries) 

FMD foot and mouth disease 

FUNCAFE Fundo de Defesa da Economia Cafeeira (Coffee Fund) 

FUNDACEP Fundação Centro de Experimentação e Pesquisa Fecotrigo (Wheat Experimentation 

and Research Center Foundation) 

FUNDECITRUS Fundo de Defesa da Citricultura (Citrus Plant Protection Fund) 

FVO Food and Veterinary Office (EU) 

GDP gross domestic product 

GM genetically modified 

GMO genetically modified organism 

GNI gross national income 

GSSE general services support estimate (OECD) 

GTIS Global Trade Information System 

HPAI high-pathogen avian influenza 

HS Harmonized System (global tariff system) 

IAC Instituto Agronômico de Campinas (Campinas Institute of Agronomy) 

IAPAR Instituto Agronômico do Paraná (Paraná Institute of Agronomy)

IBAMA Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis 

(Brazilian Institute for the Environment and Renewable Natural Resources) 

IBGE Instituto Brasileiro de Geografia e Estatística (Brazilian Institute of Geography and 

Statistics) 

ICMS imposto sobre a circulação de mercadorias (state-level value-added tax) 

IMEA Instituto Mato-grossense de Economia Agrícola (Mato Grosso Institute for 

Agricultural Economics) 

INCAPER Instituto Capixaba de Pesquisa, Assistência Técnica e Extensão Rural (Espírito 

Santo Institute for Research, Technical Assistance and Rural Extension) 

INCRA Instituto Nacional de Colonização e Reforma Agrária (National Institute for 

Colonization and Land Reform) 

INPE Instituto Nacional de Pesquisas Espaciais (National Institute of Space Research) 

IP identity preserved 

IPA Instituto Agronômico de Pernambuco (Pernambuco Institute of Agronomy) 

IPI imposto sobre produtos industrializados (national-level value-added tax) 

 
xviii

ACRONYMS AND ABBREVIATIONS—

Continued

IRGA Instituto Rio-Grandense do Arroz (Rio Grande Rice Research Institute) 

kg kilograms 

LCA letro de crédito do agronegócio (agribusiness letter of credit note) 

LPAI low-pathogen avian influenza 

MAPA Ministério da Agricultura, Pecuária e Abastecimento (Ministry of Agriculture, 

Livestock, and Food Supply) 

Marfrig Marfrig Frigorificos e Comercio de Alimentos S.A. (large Brazilian food 

processing company) 

MBA master of business administration degree 

Mercosul Mercado Comum do Sul (Common Market of the South—“Mercosur” in Spanish) 

MDA Ministério do Desenvolvimento Agrário (Ministry of Agricultural Development) 

MFN most favored nation 

MMA Ministério do Meio Ambiente (Ministry of the Environment) 

mt metric tons 

mmt million metric tons 

MNC multinational corporation 

MPOG Ministério do Planejamento, Orçamento e Gestão (Ministry of Planning, Budget, 

and Management) 

MST Ministério da Ciência e Tecnologia (Ministry of Science and Technology) 

MY marketing year 

NASS National Agricultural Statistics Service (USDA) 

NCR nota de crédito rural (rural credit memo)

nesoi not elsewhere specified or included 

NHTC Non-Hormone Treated Cattle program 

NPK nitrogen, phosphorus, and potassium fertilizer 

NPLT National Plan for Logistics and Transportation 

NTMs nontariff measures 

OCEPAR Organização das Cooperativas do Estado do Paraná (Paraná State Cooperatives 

Organization) 

OECD Organisation for Economic Co-operation and Development 

OEPAs Organizações Eestaduais de Pesquisa Agropecuária (state agricultural research 

organizations) 

OIE World Organisation for Animal Health 

OLI ownership-location-internalization paradigm 

OPEC Organization of Petroleum Exporting Countries 

PAC Programa de Aceleração do Crescimento (Growth Acceleration Program) 

PAP Plano Agrícola e Pecuário (Agriculture and Livestock Plan) 

PEP Prêmiopara Escoamento de Produto (Premium for Marketing of Products) 

program 

PEPRO Prêmio Equalizador Pago ao Produtor (Equalizing Premium Paid to the Grower) 

program 

PES payments for environmental services 

PESAGRO–RIO Empresa de Pesquisa Agropecuária do Estado do Rio de Janeiro (Rio de Janeiro 

State Agricultural Research Corporation) 

PGPM política de garantia de preço mínimo (guaranteed minimum price policy) 

PIS Programa de Integração Social (Program for Social Integration—taxes) 

PPA Plano Plurianual (Multiyear Plan) 
xix

ACRONYMS AND ABBREVIATIONS—

Continued

PROAGRO Programa de Garantia da Atividade Agropecuária (Agricultural Activity 

Guarantee Program) 

PROAMBIENTE Programa de Desenvolvimento Socioambiental da Produção Familiar Rural 

(Program for the Socio-Environmental Development of Family Farming) 

PRODES Projeto de Estimativa de Desflorestamento da Amazônia (Amazon Deforestation 

Estimate Project) 

PRONAF Programa Nacional de Fortalecimento da Agricultura Familiar (National Program 

for Strengthening Family Farming) 

PROP Prêmio de Riscopara Aquisição de Produto Agrícola Oriundo de Contrato 

Privado de Opção de Venda (Risk Premium for Acquisition of Agricultural 

Products Deriving from Contract Option Private Sales) program

PRTs pathogen reduction treatments 

PSD Production, Supply, and Distribution

PSE producer support estimate (OECD) 

PSR Programa de Subvenção ao Prêmio do Seguro Rural (Rural Insurance Premium 

Subsidy Program) 

RED Renewable Energy Directive (EU) 

R$ Brazilian currency: real (singular); reais (plural) 

SNCR Sistema Nacional de Crédito Rural (National Rural Credit System) 

SEAF Seguro de Agricultura Familiar (Insurance for Family Farms) 

SFA Secretariada Agricultura Familiar (Department of Family Farming) 

Sindirações Sindicato das Indústrias de Alimentação Animal (National Animal Feed Industry 

Association) 

SOE state-owned enterprise 

SPS sanitary and phytosanitary 

Seara Seara Alimentos S.A. (large food company, part of Marfrig Group) 

TBTs technical barriers to trade 

TRIPS Trade-Related Aspects of Intellectual Property Rights 

TRQs tariff-rate quotas 

TSE total support estimate (OECD) 

UAE United Arab Emirates 

UNITINS Fundação Universidade do Tocantins (Foundation University of Tocantins) 

USAPEEC U.S.A. Poultry and Egg Export Council 

USDA United States Department of Agriculture 

USTR United States Trade Representative 

VAT value-added tax 

VEP Valor para Escoamento de Produto (Value for Marketing of Products) program 

WTO World Trade Organization 

xxi 

Executive Summary 

Brazil is one of the world’s largest agricultural economies. It is the leading global 

producer of coffee, cane sugar, oranges and orange juice, and dry beans, and one of the 

top three producers of soybeans, beef, poultry, corn, and dozens of other meats, grains, 

oilseeds, and horticultural products. With over 200 million people, Brazil is also a 

significant consumer of many agricultural products, particularly beef, poultry, corn, 

soybean meal, and soybean oil. The Brazilian agricultural sector has rapidly increased 

domestic production through land expansion and higher yields, thereby meeting rising 

food requirements for Brazilian consumers and creating opportunities to supply foreign 

customers. Over the past 20 years, Brazil has emerged as a leading global exporter of 

commodities such as soybeans, soybean meal and oil, corn, beef, poultry, pork, cotton, 

and orange juice. 

Brazil’s status as a major agricultural exporter has significant implications for the United 

States. The U.S. agricultural sector relies heavily on export markets. In 2011, the United 

States exported $146 billion in agricultural goods, up from $76 billion in 2006; these 

exports represented one-third of U.S. farm cash receipts. Brazil’s exports increased from 

$37 billion in 2006 to $82 billion in 2011. With the exception of cane sugar and coffee, 

Brazil’s exports are typically goods that the United States also exports in large volumes, 

such as beef, poultry, pork, corn, and soybeans. 

U.S. agricultural exports to its top five markets—Canada, China, Mexico, Japan, and the 

European Union (EU-27)—rose 76 percent during 2006–11, from $49 billion to 

$87 billion. Agricultural exports from Brazil to those markets increased 132 percent over 

the same period, from $16 billion to $38 billion. In other major markets, such as the 

Republic of Korea (“Korea”), Taiwan, Saudi Arabia, and to a lesser extent the Russian 

Federation (“Russia”), the pattern is much the same; the value of U.S. agricultural exports 

increased, but Brazil outpaced U.S. export growth rates, starting from a lower level of 

trade. Comparative statistics for Brazil and the United States regarding agricultural trade 

are presented in table ES.1. 

Many in the U.S. agricultural community, business representatives, and policymakers 

have expressed concern that Brazilian agricultural exports to major third-country markets 

are competing directly with U.S. exports of similar goods. The rapid modernization and 

growth of Brazil’s agricultural production has been fueled by an advantageous climate, 

ready access to new agricultural lands, public and private sources of funding for 

agricultural research, and rising levels of investment by consolidated agribusinesses with 

a global focus. Together, these factors are leading to rising exports and continued export 

orientation by Brazilian firms and cooperatives. Furthermore, Brazilian government 

policies boost lending to farmers, provide inexpensive capital to agribusinesses, 

streamline the regulatory process for adopting high-yielding seed varieties, and provide 

payments to producers or wholesalers of selected crops. These actions partially offset 

transportation costs and strengthen the competitive position of Brazilian exports in 

markets where U.S. products also directly compete. 

 
xxi 

TABLE ES.1 Brazil and the United States: Comparative statistics related to agricultural trade, 2011 

 Brazil United States 

Population (est. July 

2010) 

203 million 313 million 

Total Gross Domestic 

Product (2010) 

Cropland (2009)a

$2.1 trillion 

69 million hectares 

$14.7 trillion 

165 million hectares 

Value of farm production 

(2010) 

$122 billion $352 billion 

Farm production as share 

of GDP (2010) 

5.8 percent 2.4 percent 

Agricultural import value $11.0 billion $102.7 billion 

Top five agricultural 

imports by value 

Wheat and wheat flour, ethanol, malt, 

cotton, and vegetable oils 

Alcoholic beverages, processed foods, 

vegetables, coffee, meats 

Top five agricultural 

import suppliers 

Argentina, EU-27, United States, Uruguay, 

Paraguay 

EU-27, Canada, Mexico, Brazil, China 

Agricultural export value $81.7 billion $146.3 billion 

Top five agricultural 

exports by value 

Soybeans, cane sugar, coffee, frozen 

chicken cuts, frozen boneless beef 

Soybeans, corn, wheat, cotton, processed 

foods 

Top five agricultural 

export markets 

EU-27, China, United States, Russia, 

Japan 

Canada, China, Mexico, Japan, EU-27 

Source: GTIS, Global Trade Atlas database (accessed February 13, 2012); CIA, The World Factbook: Brazil and 

United States; FAO, Land Use Indicators, 2011 (accessed March 13, 2012); The World Bank, World Indicators

database, 2011 (accessed November 4, 2011). 

a

The latest year available.

This report responds to a request made to the U.S. International Trade Commission 

(USITC) by the Senate Committee on Finance (SFC) for information on and analysis of 

competitive factors in Brazil affecting U.S. and Brazilian agricultural sales in major thirdcountry markets. Noting the importance of Brazil in global export markets for a range of 

agricultural products, the SFC pointed to the rapid rise of Brazil’s agricultural exports 

and the changing competitive landscape for U.S. sales of certain products in selected 

markets. The SFC asked that the USITC’s report include the following: 

 an overview of agricultural markets in Brazil, including recent trends in 

production, consumption, and trade; 

 an overview of U.S. and Brazilian participation in global export markets for 

meat, grain, and oilseed products, particularly in the EU-27, Russia, China, 

and Japan, and markets with which Brazil has negotiated trade agreements; 

 a description of the competitive factors affecting the agricultural sector in 

Brazil, in such areas as costs of production, transportation and marketing 

infrastructure, technology, exchange rates, domestic support, and government 

programs related to agricultural markets; 

 a description of the growth of Brazilian agribusiness firms and their effects 

on global food supply chains; 
xxii 

 a description of the principal measures affecting U.S. and Brazilian 

agricultural exports of meat, grain, and oilseed products in major thirdcountry export markets, including sanitary and phytosanitary measures and 

technical barriers to trade; and 

 a quantitative analysis of the economic effects of preferential tariffs 

negotiated under Brazil’s free trade agreements on U.S. and Brazilian exports 

of meat, grain, and oilseed products, as well as the economic effects of 

selected nontariff measures on U.S. and Brazilian exports of meat, grain, and 

oilseed products in major third-country markets. 

Major Findings and Observations 

Brazil’s Agricultural Trade 

 Brazil is a major exporter of agricultural products and ships to a number of 

 global markets. 

During 2006–10, Brazil accounted for almost 9 percent of global agricultural exports, 

making it the world’s third-largest agricultural exporter, behind only the EU-27 and the 

United States. Exports are concentrated in a few major commodities, with soybeans, 

soybean meal and oil, sugar, and coffee accounting for more than 50 percent of Brazil’s 

total agricultural exports between 2006 and 2011, and poultry and beef accounting for an 

additional 19 percent. 

Brazil’s exports are dispersed among a large number of destination markets that are also 

important to U.S. exporters. In 2011, the EU-27 was Brazil’s largest agricultural market, 

accounting for 24 percent of total export value, followed by China (18 percent), the 

United States (6 percent), and Russia (5 percent). Other important markets include Japan, 

Venezuela, and several markets in the Middle East (Saudi Arabia, Iran, and Egypt). 

Brazilian agricultural exports to countries that are fellow members of the Mercado 

Comum do Sul (Mercosul) (Argentina, Paraguay, and Uruguay) accounted for less than 

2 percent of total export value in 2011. 

 Brazil’s competition with the United States for exports of grains, oilseeds, and meats 

 to third country markets is somewhat limited. 

Although Brazil and the United States are both global exporters of grains, oilseeds, and 

meats, direct competition between the two countries currently is muted. For example, 

both countries supply China with soybeans and soybean products. But given the rapid 

growth in Chinese soybean demand, increases in U.S. and Brazilian production are 

readily consumed, and global prices remain strong. In terms of poultry exports, while 

Brazil and the United States are the world’s leading suppliers, top destination markets for 

each country do not overlap, except for Hong Kong. Brazilian poultry is primarily 

produced and packaged for customers with exacting specifications in mind (such as halal 

or hand-cut poultry), while the U.S. product tends to be undifferentiated broiler cuts, such 

as leg quarters. In the beef sector, U.S. competition with Brazil is also limited because 

each country serves a different market segment. The United States supplies high-quality, 
xxiii 

grain-fed beef destined for Canada, Mexico, Japan, and Korea, while Brazil supplies 

grass-fed beef used in processed products to other markets such as Russia. Because of 

import bans related to foot-and-mouth disease (FMD), there is limited market access for 

Brazilian beef in many of the largest U.S. export markets. 

Brazilian Domestic Production and Consumption 

Agriculture accounts for 6 percent of the Brazilian economy, and the Brazilian 

agricultural sector has become a major world producer. 

In 2010, Brazil’s agricultural production, valued at $122 billion, accounted for 6 percent 

of gross domestic product (GDP) and 20 percent of formal employment. In 2010, Brazil 

was the world’s largest producer of cane sugar, coffee, oranges and orange juice, and 

edible dry beans. Brazil was one of the three largest producers of many other products as 

well, including, among others, tobacco, soybeans, beef, broilers (chicken meat), and corn. 

Consumption of agricultural products is changing in Brazil; because of rising 

incomes, consumers are demanding higher quantities of food and a wider variety of 

choices. 

With the fifth-largest population in the world, Brazil is one of the world’s leading 

consumers of meats, cereals, pulses, and oilseeds. Over the past five years, higher per 

capita incomes have encouraged a shift away from traditional staple foods to a more 

diversified diet, especially in the poorer North and Northeast regions, where substantial 

increases in the minimum wage and income subsidies to low-income families have 

boosted food consumption. Rising economic prosperity also has allowed consumers to 

increase the proportion of food consumed outside the home. As a result of these changing 

consumption patterns, many Brazilian agricultural producers are expanding their 

marketing efforts in the home market instead of concentrating on export promotion. 

Competitiveness of Brazil’s Agricultural Sector 

Despite significant inefficiencies, Brazil’s agricultural sector is globally competitive 

owing to the country’s considerable natural endowments, skilled farmers, 

supportive government policies, and sophisticated industry strategies. 

Brazil’s low-cost resource base, including ample land and water resources and weather 

patterns conducive to intensive land use, enables high-yielding crop production across a 

wide range of agricultural products. Government-funded agricultural research has 

developed crop varieties that flourish in the acidic soils of Brazil’s previously untapped 

Center-West region. Large-scale commercial farms run by skilled operators with 

extensive business and investment acumen contribute to a high level of sophistication and 

modern production practices in the sector. For the most part, low on-farm production 

costs have helped to make Brazil a competitive exporter, despite significant challenges. 

Brazilian agricultural production and exports have the potential to continue growing 

significantly, stemming from large areas of untapped agricultural land and research and 

development programs that will likely foster improvements in production practices and 

yields in many agricultural sectors. 
xxiv 

Significant obstacles will continue to create a drag on Brazil’s agricultural 

production and exports, mitigating future increases in export potential. 

Despite the tremendous potential to continue to expand production as a result of Brazil’s 

natural endowments and untapped land, several important factors are likely to slow 

potential production expansion. Much of the available farmland is in areas that lack good 

access to transportation infrastructure. Increasing demands for transportation, storage, 

and port infrastructure and capacity will likely outpace supply for quite some time, 

despite government efforts in this area. At the same time, high interest rates and currency 

appreciation appear likely to persist in the near future, making exports more expensive. In 

addition, livestock disease issues are years away from being resolved, and growing 

environmental and social demands will take government resources away from other 

investments. Brazil’s burdensome labor laws and tax structures also increase costs. 

Brazilian exports are likely to grow more slowly in this environment, particularly if rising 

domestic demand siphons Brazilian agricultural supplies from third-country markets. 

Inadequate transportation infrastructure erodes many of the production cost 

advantages enjoyed by Brazilian agricultural producers.

Brazil’s vast geography, the long distances between inland agricultural production areas 

and ports, and the lack of expansive rail networks or viable waterways contribute to an 

overreliance on expensive road transport, transportation inefficiencies, and high logistics 

costs. For example, the domestic transportation costs of soybeans harvested in Mato 

Grosso, one of Brazil’s largest agricultural states, account for 25–30 percent of the total 

cost at the port of export, compared with only 8–10 percent for soybeans harvested and 

transported in the United States. 

Brazil’s Government Policies Affecting Agriculture 

Government policies have played a major role in the Brazilian agricultural sector, 

but their goals have evolved over time. 

Brazilian government policies have been instrumental in shaping the current size and 

structure of its agricultural and food products sector. Driven by considerations such as 

food security, inflation, social inclusion, modernization, and global competitiveness, the 

goals and scope of these policies have changed over time. In the past, agricultural policies 

focused on direct market-intervention measures such as government purchases, price 

controls, high import duties, and export controls. Now they have shifted to measures that 

seek to leverage private sector involvement, such as preferential credit and project 

financing, as well as agricultural research and development. In addition, newer policies 

address growing concerns among Brazilian policymakers about various social and 

environmental issues. 

Brazilian government assistance to the agricultural sector has grown in recent years, 

but remains lower than that of other major agricultural competitors. 

Funding for agricultural programs in Brazil rose 82 percent during 2006–10 to 

R$18.5 billion ($11.1 billion), while rural credit allocations rose 102 percent, to 
xxv 

R$107.5 billion ($64.4 billion). However, the level of support to producers, as measured 

by the producer support estimate of the Organisation for Economic Co-operation and 

Development, is low compared with other major agricultural producers and exporters, 

both in absolute terms and as a share of agricultural output. In 2010, Brazil’s PSE 

represented about 4.5 percent of the value of agricultural production, compared with 

7.0 percent in the United States, 17.4 percent in China, 19.8 percent in the EU-27, and 

21.4 percent in Russia. While many of Brazil’s government policies lower the cost of 

production for farmers and processors, some policies, including intrastate taxes, 

environmental regulations, and restrictions on foreign investment in farmland, impose 

costs on Brazilian agricultural producers and erode their competitiveness in export 

markets. 

Brazil’s government recognizes the need to improve the country’s transportation 

infrastructure, and has undertaken initiatives to increase both public- and privatesector investment in new projects. 

Through its National Plan for Transportation and Logistics (NPTL) and the Growth and 

Acceleration Plan (PAC), the Brazilian government intends to undertake significant 

levels of public investment in infrastructure development to improve and expand 

railways, waterways, road networks, and ports. Between now and 2023, the NPTL calls 

for a substantial reduction in the use of road transport, coupled with increases in railway 

and waterway use. The PAC and its successor, PAC 2, are shorter-term plans covering 

2007–14, and provide tax cuts, investment incentives, credit, and long-term financing for 

infrastructure projects. Through a variety of mechanisms, including concession 

agreements, private industry is also expected to account for a significant portion of PAC 

funding. 

Despite significant government investments in infrastructure, progress has generally been 

characterized as uneven and slow. Meanwhile, demand for infrastructure continues to 

rise, fueled by expanded agricultural production. Spending on infrastructure development 

will have to increase if it is to outpace demand growth and lessen transportation costs. 

Private sector investment will play an important role in meeting the government’s 

infrastructure development goals. 

Government efforts to privatize the operation of public sector assets in the 1990s, notably 

ports and railways, have led to increased private sector investment and improved 

conditions in these sectors. Private sector investments in port terminals are improving 

overall port capacity and efficiency. Significant efforts are underway to expand and 

integrate Brazil’s rail network through concessions to private companies in order to better 

connect agricultural regions to ports and reduce transportation costs. In addition, many of 

Brazil’s agricultural producers have made their own investments in local road networks, 

storage and warehousing facilities, and port terminals to improve their supply chains and 

reduce transportation inefficiencies. 

 
xxvi 

Brazilian Agribusiness and Global Supply Chains 

Three Brazilian meat and poultry firms have substantial investments outside of 

Brazil and are among the largest producers and exporters in the world. 

The strong real and foreign import barriers have encouraged Brazilian agribusinesses in 

the meat and poultry industries to grow by acquisition abroad. JBS Friboi, Marfrig 

Alimentos, and Brasil Foods, the three largest agribusiness firms in Brazil, have become 

some of the world’s largest protein producers and exporters. Brazil’s strong currency has 

made overseas acquisitions more affordable for Brazilian firms, and these acquisitions 

have allowed Brazilian firms to gain access to foreign markets where Brazilian beef and 

pork are banned because of the presence of FMD in Brazil. 

Other multinational firms are key players in Brazilian exports of grains and oilseeds. 

The “Big Four” multinational agribusiness firms (Cargill, Bunge, Archer Daniels 

Midland, and Louis Dreyfus) account for a significant share of Brazilian agricultural 

exports, particularly in the grain and soybean markets. Because of their global presence, 

these companies generally do not view global markets in terms of competition between 

large producing countries, such as Brazil and the United States. Instead, they see the 

principal exporting countries as an integrated system on which they depend to supply 

growing worldwide demand. Nearly all agribusinesses expect global food demand to 

continue to expand into the foreseeable future as rising incomes in many emerging 

markets result in increasing consumption levels. In particular, increasing animal protein 

consumption is boosting demand not only for beef, pork, and poultry, but also for grains 

and soybean meal used for animal feed. 

Soybeans 

Soybeans produced in Brazil are cost-competitive with those of all major producers, 

including the United States. However, there is only limited direct competition 

between U.S. and Brazilian soybeans in third-country markets. 

Soybeans remain the backbone of Brazil’s agricultural economy, fueling export-led 

growth since the 1990s. Brazilian soybeans are currently cost-competitive with 

production anywhere in the world, including the United States—the world’s largest 

producer. For most export markets and marketing channels, soybeans from Brazil and the 

United States are interchangeable commodities. Yet direct competition between the two 

countries in third-country markets is limited, for several reasons. Global demand over the 

last five years has remained strong and is rising, particularly in China. Large increases in 

demand have often outpaced production increases. Also, the harvest seasons in Brazil and 

the United States do not completely overlap, which allows China and other importers to 

buy newly harvested soybeans throughout much of the year. In addition, consumers may 

favor one country’s soybeans over another. For example, the golden color of U.S. 

soybeans is preferred in Japan for certain food-grade applications over the reddish color 

of Brazilian soybeans. In the EU-27, Brazil’s ability to provide conventional (nongenetically modified) soybeans and traceability at a reasonable cost gives that country’s 

soybeans a competitive advantage over U.S. soybeans. 
xxvii 

Future growth prospects for Brazil’s soybean production remain uncertain. 

The Brazilian soybean sector faces important disadvantages that may slow its growth 

prospects in the future. These disadvantages include soil with poor nutrients that requires 

large volumes of imported fertilizer to maintain yields; poor transportation infrastructure 

in areas of Brazil where additional expansion of soybean production is likely; high capital 

costs, which tend to restrict investment in new storage facilities; and a complex tax 

system that somewhat discourages exports of value-added oil and meal. Whether Brazil 

can continue its rapid expansion of soybean production and increase the supply available 

for export at competitive prices depends largely on the ability of state and federal 

governments to improve railroads, roads, waterways, and ports and to maintain a business 

environment conducive to private investment. 

Grains (Corn and Wheat) 

Brazil’s corn production is currently expanding, and the industry is costcompetitive in international markets, primarily due to low land costs. 

Brazil is a significant producer, consumer, and trader of cereal grains. Corn accounts for 

78 percent of Brazilian grain production and 85 percent of grain exports by volume. Corn 

production in Brazil increased 13 percent between 2006 and 2010, primarily due to 

higher yields from improved management practices, and a production shift to CenterWest states, such as Mato Grosso. The tropical Center-West region is characterized by 

very large farms with the ability to plant corn immediately after the soybean harvest. 

Despite the on-farm cost advantages of production in the Center-West, infrastructure and 

transportation constraints raise the delivered costs to export markets. 

 Increased demand from the domestic livestock sector will compete with export 

markets for Brazilian corn production. 

Domestically, the quantity of corn used for animal feed rose 23 percent from 2006 to 

2010, reflecting higher Brazilian production of poultry and pork products. The growth of 

Brazil’s corn production is expected to primarily serve rising domestic demand, while 

still allowing modest growth in exports. However, recent global price spikes have 

encouraged Brazilian exports, boosting feed costs for domestic livestock producers. 

Brazil is rapidly becoming a consistent supplier of corn to international markets, 

despite transportation bottlenecks that raise costs. However, the United States 

 should remain by far the largest corn exporter because of the size of its corn sector. 

Brazilian corn exports increased 44 percent (by volume) between 2006 and 2010, in 

response to increased global demand and reduced global inventories. Brazil has 

developed relationships with specific markets in recent years—such as the EU-27, 

Taiwan, Iran, and Colombia—for particular product specifications, price-sensitive 

markets, and international buyers looking to diversify their suppliers. However, the 

United States exports more than four times as much corn as Brazil, and it has over half of 

the global market share of exports by volume. Both the United States and Brazil will need 

to increase production to satisfy the growing global demand for corn. 
xxviii 

Brazil is a significant net importer of wheat, but has exported wheat as well due to 

tight global market conditions and aid from Brazilian government programs. 

Brazil is a net importer of wheat, relying on foreign production (primarily from 

neighboring Argentina) for more than half its supply. Brazil’s wheat industry does not 

produce wheat with desirable characteristics for milling because of unfavorable growing 

conditions. Wheat exports generally consist of lower-quality wheat for feed, competing 

more directly with corn and other feed grains than with the milling wheat most 

commonly exported from the United States. To help their product compete in thirdcountry markets, Brazilian wheat producers receive government payments that partially 

offset transportation costs. 

Poultry 

Brazilian and U.S. poultry producers dominate global export markets because they 

are both cost-competitive against other global producers. 

In 2010, Brazil was the world’s third leading broiler meat (poultry)-producing country, 

behind the United States and China, and the largest exporter. Brazil and the United States 

have similar production methods, dominated by large, vertically integrated companies 

that control multiple stages of production. Cost structures of Brazilian and U.S. poultry 

production are also similar, largely because feed costs (the most important component of 

poultry costs) are closely linked to global corn and soybean prices. 

Brazil’s competitiveness in broiler exports vis-à-vis the United States is enhanced by 

product differentiation and Brazil’s freedom from avian influenza. Competition 

between the two countries, however, is limited, and increasing costs are eroding 

Brazil’s advantages. 

Brazil and the United States tend to export different products to different countries. While 

U.S. producers focus primarily on the domestic market, exporting mostly surplus cuts, the 

Brazilian poultry industry is more dependent on overseas customers, especially those 

requiring halal standards and hand-cut production. Brazil’s competitiveness is enhanced 

by its industry’s willingness to produce poultry that is processed and packaged to the 

preferences of major customers. Further, Brazil’s avian influenza-free status gives it an 

advantage over the United States in certain markets, such as Japan and China. Offsetting 

these competitive advantages are high transportation costs, the higher value of the real, 

and rising labor costs. 

Beef and Pork 

Brazil is a low-cost producer of beef and pork, and a major exporter of both. 

Brazil’s pork producers benefit from Brazil’s large and increasing production of corn and 

soybean meal, the main ingredients in swine rations. Brazil’s beef producers benefit from 

the country’s extensive pastureland. Both beef and pork production benefit from 

relatively low labor costs. Consolidation in Brazil’s beef and pork industries—within and 

across species, internationally, and vertically through the production process—has 
xxix 

furnished the sector with both capital and technical expertise, enhancing its global 

competitiveness. 

Competition between U.S. and Brazilian exports of beef and pork in many 

third-country markets is limited by sanitary trade restrictions. 

Foreign sanitary measures that ban beef and pork from countries with a history of animal 

diseases, such as FMD, restrict Brazil’s fresh/chilled and frozen beef and pork exports to 

a limited number of markets. Those measures also increase production costs because of 

required vaccination and monitoring. Although FMD was last reported in Brazil in 2006, 

some regions of Brazil are not considered by many importing countries to be FMD-free. 

While a number of countries consider most of Brazil to be FMD-free with vaccination, 

Brazil is ineligible to export fresh/chilled and frozen beef and pork to principal U.S. 

markets such as North America, Japan, and Korea because of FMD concerns. 

Because Brazil’s beef and pork exports are concentrated in a few markets, a loss of 

access can be very detrimental to those industries. In 2008, the EU-27 strengthened 

traceability requirements for cattle producing beef for European consumers, which 

removed the eligibility of many Brazilian cattle producers to export there. In 2010, 

Russia found that many Brazilian meat packers did not meet its sanitary requirements, a 

finding mainly affecting pork exports. 

Brazilian and U.S. beef have different consumer characteristics. Even in export 

markets where both compete, they are sold for the most part to different consumer 

segments and sales channels. 

Brazil produces primarily grass-fed beef, whereas the United States produces primarily 

grain-fed beef. The difference in consumer characteristics of grass-fed versus grain-fed 

beef limits competition between U.S. and Brazilian beef in third-country markets. Grainfed beef is preferred for many dishes prepared using dry heat (steaks and most roasts) or 

in dishes in which thin slices of beef are cooked quickly. Grass-fed beef is generally 

leaner, with less intramuscular fat (marbling); it is often added to high-fat trimmings from 

grain-fed beef and used in processed beef products such as hamburgers. In some markets, 

such as Egypt, U.S. beef muscle cuts serve a high-end segment of the market, while U.S. 

edible offal (e.g., livers, hearts, and kidneys) competes with Brazilian grass-fed beef in 

more price-sensitive segments of the market. 

The United States and Brazil compete directly in the markets for beef and pork in 

Russia, China, and Hong Kong. 

In the Russian market, the United States and Brazil compete for similar customers in 

supplying beef and pork for the production of processed meat products (e.g., sausage). 

The United States benefits from country-specific quotas for both beef and pork, while 

imports from Brazil compete with other suppliers under Russia’s “other countries” quota. 

On the other hand, because of Brazil’s status as a developing country, Brazilian suppliers 

of beef and pork are assessed a duty equal to only 75 percent of the most-favored-nation 

(MFN) rate charged on imports from the United States. 
xxx 

Hong Kong is a major export market for pork and beef from both the United States and 

Brazil. Most U.S. pork producers are eligible to export to China, subject to testing for 

chemical residues. However, only three pork exporters in Brazil have been approved to 

export to China, and they have gained this approval recently, with the first shipments 

arriving at the end of 2011. China bans imports of beef from the United States, due to 

BSE concerns, and allows imports from only a limited number of beef producers in 

Brazil. 

Modeling Results 

Nontariff measures: Model simulation results prepared by USITC staff show that in 

2010, food and agriculture NTMs in five major markets—the EU-27, Japan, Korea, 

China, and Russia—reduced U.S. exports of focus products (beef, pork, poultry, corn, 

and wheat) by $5.0–11.0 billion (table ES.2). NTMs in these markets also reduced 

Brazilian exports of focus products by $3.7–5.9 billion. Removal of these NTMs would, 

among other things, likely result in higher demand for the focus products in the EU-27 

from all sources and increase imports of U.S. focus products in China, Japan, Korea, and 

Russia. 

TABLE ES.2 Simulated effects of the removal of beef, pork, poultry, corn, and wheat NTMs 

Product Exporter 

Exports to 

the world, 

2010 

Change in

exports to the 

world 

Change in imports 

China EU-27 Japan Korea Russia

 Million $ 

All 

products 

U.S. 29,748 4,956–10,965 703–2,008 3,385–8,317 939–1,433 167–330 123–377

Brazil 15,763 3,669–5,936 (91)–(68) 4,692–7,391 (654)–(449) 40–90 461–536

Other 38,678 5,073–7,449 (396)–(186) 2,623–2,874 2,240–3,195 (391)–(179) (158)–78

Sources: Comtrade and USITC staff estimates. 

Notes: Figures in parentheses indicate a negative number. EU-27 exports counted under “other exporters” exclude intra-EU trade. 

The simulated effects are given in ranges calculated by performing sensitivity analysis with respect to the values of the international 

trade elasticities in the simulation model. Changes in total exports may differ from the sum of changes in imports in the five focus 

markets because of import changes in other countries. Exports are free on board (f.o.b.). Imports are cost, insurance, and freight 

(c.i.f.). 

 Free trade agreements: Model simulation results also show that if none of Brazil’s 

imports or exports received preferential duties (i.e., all of Brazil’s trade faced normal 

trade relations duties), the effect on total U.S. agricultural exports would be negligible. 

1-1

CHAPTER 1 

Introduction 

Brazil is one of the world’s largest agricultural economies. It is the leading global 

producer of coffee, cane sugar, oranges and orange juice, and dry beans, and one of the 

top three producers of soybeans, corn, beef, poultry, and dozens of other meats, grains, 

and horticultural products.1

 With over 200 million people, Brazil is also a significant 

consumer of many agricultural products.2 Its current share of global beef consumption is 

14 percent, third largest after the United States and the European Union (EU-27). Brazil’s 

global share of poultry (broiler) consumption is 12 percent, third after the United States 

and China, and its economy also consumes 6 percent of global corn production, largely 

for animal feed. In addition, Brazil consumes 8 percent and 13 percent of global soybean 

meal and soybean oil production, respectively. 

The Brazilian agricultural sector is not only large, it is also highly dynamic. It has rapidly 

increased domestic production through land expansion and higher yields, thereby meeting 

rising food requirements for Brazilian consumers, but also creating opportunities to 

supply foreign customers. In the period immediately following World War II, Brazil 

exported only a few primary agricultural commodities such as sugar and coffee beans, for 

which it is still known. Over the past 20 years, however, Brazil has greatly diversified, 

emerging as a leading global exporter of many other commodities, including soybeans, 

soybean meal and oil, corn, beef, poultry, pork, cotton, and orange juice. 

The emergence of Brazil as a major agricultural exporter has significant implications for 

the United States. The U.S. agricultural sector relies heavily on export markets. In 2011, 

the United States exported $146 billion in agricultural goods, up 92 percent from 

$76 billion in 2006 and representing approximately one-third of U.S. farm cash receipts.3

Furthermore, U.S. agricultural exports to its top five markets—Canada, China, Mexico, 

Japan, and the EU-27—increased from $49.5 billion in 2006 to $87.2 billion in 2011, a 

rise of 76 percent.4

 Opportunities abound for the United States to increase agricultural 

sales in foreign markets, particularly China, Japan, the Russian Federation (“Russia”), 

and the Republic of Korea (“Korea”). 5

 These four countries have large populations, 

growing per capita incomes, and consumption patterns shifting toward foods in which the 

United States is internationally competitive—meats, feed grains, oilseeds, dairy, 

horticultural products, and processed foods. 

During 2006–11, Brazil increased its agricultural exports by 123 percent, from 

$36.6 billion in 2006 to $81.7 billion in 2011. Moreover, total agricultural exports from 

 1

 FAO, FAOSTAT database (accessed November 18, 2011); USDA, FAS, PSD Online (accessed 

January 25, 2012). 2

 CIA, World Factbook: Brazil (accessed October 21, 2011). 3

 GTIS, Global Trade Atlas database (accessed December 5, 2011); USDA, ERS, Value of U.S. 

Trade—Agricultural, Nonagricultural, and Total, February 2011. 4

 GTIS, Global Trade Atlas database (accessed March 31, 2012). 5

 In this report, USITC staff use the terms “sales” and “exports” interchangeably. Therefore, when 

referencing sales made by Brazilian agribusinesses exporting from the United States, the report will refer to 

them as “U.S. sales” or “U.S. exports.” Conversely, in discussing sales made by U.S. agribusinesses 

exporting from Brazil, the report will refer to “Brazilian sales” or “Brazilian exports.” 
1-2

Brazil to the United States’ top five markets also increased substantially over that period, 

from $16.4 billion to $38.0 billion, or 132 percent. In other major markets, such as Korea, 

Taiwan, Saudi Arabia, and, to a lesser extent, Russia, the pattern is the same: the United 

States saw increases in the value of agricultural exports, but Brazil’s exports grew at a 

faster rate, albeit from a lower base. 

The overlapping nature of the two countries’ exports is also noteworthy. With the 

exception of cane sugar and coffee, Brazil’s increases in export sales have been in goods 

that the United States also exports in large volumes. Moreover, Brazilian agricultural 

exports to rapidly growing markets, such as China, are highly concentrated in a few 

products—soybeans and soybean products, cotton, corn, and animal hides. These 

products also accounted for the vast majority of Chinese imports of U.S. agricultural 

products during 2006–11. 

The U.S. agricultural community, business representatives, and policymakers have 

expressed the concern that Brazilian agricultural exports to major third-country markets 

are competing directly with U.S. exports, thereby impacting U.S. market share and 

profits. Brazil is a formidable competitor in many products. The rapid modernization and 

growth of Brazil’s agricultural production has been fueled by an advantageous climate, 

ready access to agricultural lands for expansion, generous funding for agricultural 

research, and rising levels of investment by consolidated agribusinesses with a global 

focus. Together, these factors have supported rising exports by Brazilian firms and 

cooperatives. Furthermore, Brazilian government policies that boost lending to farmers, 

provide inexpensive capital to agribusinesses, streamline the regulatory process for using 

high-yielding varieties of seeds, and provide payments to reduce transportation costs for 

selected crops have the potential to strengthen Brazil’s competitive position in markets 

where U.S. companies also compete. Comparative statistics for Brazilian and U.S. 

agricultural trade are presented in table 1.1. 

In its letter requesting this investigation, the Senate Committee on Finance (SFC) asked 

the U.S. International Trade Commission (USITC) to examine and report on the 

competitive factors in Brazil affecting U.S. and Brazilian agricultural sales in thirdcountry markets. The SFC asked that the report cover the period 2006 through 2010 and 

focus on the global meat, grain, and oilseed markets. 

The SFC asked that the USITC’s report include the following: 

 an overview of agricultural markets in Brazil, including recent trends in 

production, consumption, and trade; 

 an overview of U.S. and Brazilian participation in global export markets for meat, 

grain, and oilseed products, particularly in the European Union, Russia, China, 

and Japan, and markets with which Brazil has negotiated trade agreements; 

 a description of the competitive factors affecting the agricultural sector in Brazil, 

in such areas as costs of production, transportation and marketing infrastructure, 

technology, exchange rates, domestic support, and government programs related 

to agricultural markets; 
1-3

TABLE 1.1 Brazil and the United States: Comparative statistics related to agricultural trade, 2011 

 Brazil United States 

Population (est. July 

 2010) 

203 million 313 million 

Total Gross Domestic 

 Product (2010) 

Cropland (2009)a

$2.1 trillion 

69 million hectares 

$14.7 trillion 

165 million hectares 

Value of farm production 

 (2010) 

$122 billion $352 billion 

Farm production as 

 share of GDP (2010) 

5.8 percent 2.4 percent 

Agricultural import value $11.0 billion $102.7 billion 

Top five agricultural 

 imports by value 

Wheat and wheat flour, ethanol, malt, 

cotton, and vegetable oils 

Alcoholic beverages, processed foods, 

vegetables, coffee, meats 

Top five agricultural 

 import suppliers 

Argentina, EU-27, United States, Uruguay, 

Paraguay 

EU-27, Canada, Mexico, Brazil, China 

Agricultural export value $81.7 billion $146.3 billion 

Top five agricultural 

 exports by value 

Soybeans, cane sugar, coffee, frozen 

chicken cuts, frozen boneless beef 

Soybeans, corn, wheat, cotton, processed 

foods 

Top five agricultural 

 export markets 

EU-27, China, United States, Russia, 

Japan 

Canada, China, Mexico, Japan, EU-27 

Source: GTIS, Global Trade Atlas database (accessed February 13, 2012); CIA, The World Factbook: Brazil and 

United States; FAO, Land Use Indicators, 2011 (accessed March 13, 2012); The World Bank, World Indicators

database, 2011 (accessed November 4, 2011). 

a

The latest year available. 

 a description of the growth of Brazilian agribusiness firms and their effects on 

global food supply chains; 

 a description of the principal measures affecting U.S. and Brazilian agricultural 

exports of meat, grain, and oilseed products in major third-country export 

markets, including sanitary and phytosanitary measures and technical barriers to 

trade; and 

 a quantitative analysis of the economic effects of preferential tariffs negotiated 

under Brazil’s free trade agreements on U.S. and Brazilian exports of meat, grain, 

and oilseed products, as well as the economic effects of selected nontariff 

measures on U.S. and Brazilian exports of meat, grain, and oilseed products in 

major third-country markets. 

Scope of the Report 

While the request letter specifically highlights Brazil’s meat, grain, and oilseed sectors, 

this report briefly surveys Brazil’s entire agricultural sector, particularly Brazil’s 

production, consumption, and trade. It also describes Brazil’s domestic demand and 

patterns of land use to provide context for understanding Brazil’s potential for exports of 

meats, grains, and oilseeds. Table 1.2 compares the report chapters with the bullets in the 
1-4

TABLE 1.2 Comparison of report chapters to SFC request letter 

Chapter of the report Bullet of the SFC request letter and explanation 

Chapter 2: Brazil’s Agricultural Production, 

Consumption, and Trade  Addresses bullet one of the request letter. 

Chapter 3: Brazil’s Government Policies and 

Transportation Infrastructure Related to Agriculture  Addresses part of bullet three of the request letter. 

 Government policies and transportation infrastructure cross 

 over all sections of the analytical framework for competitive 

 factors (see more on the framework below in ch. 1). 

 Examines the importance of Brazil’s infrastructure on its 

 agricultural competitiveness, mostly by examining current 

 policies and spending. 

Chapter 4: Competitive Factors Affecting Brazil’s 

Agricultural Sector  Addresses part of bullet three of the request letter. 

 Examines conditions of competition in Brazilian agriculture 

 through factors that affect the cost of delivery, product 

 differentiation, and the reliability of supply. 

Chapter 5: The Role of Brazilian Agribusiness in 

the Global Food Supply Chain  Addresses bullet four of the request letter. 

Chapters 6–10: Product chapters (soybeans, 

grains, poultry, beef, and pork) 

 Addresses bullets two, three, and five of the request letter, as 

 they relate to the five agricultural sectors targeted by the SFC 

 (soybeans, grains, poultry, beef, and pork). 

 Examines conditions of competition between Brazil and the 

 United States for a number of key export markets. 

Chapter 11: Modeling Analysis of the Impact of 

Brazil’s Trade Agreements and Select Nontariff 

Measures in Certain Export Markets 

 Addresses bullet six of the request letter. 

 Provides a modeling analysis of the impacts of selected 

 nontariff measures (NTMs) on key agricultural exports in 

 certain export markets. 

 Also analyzes impacts of Brazil’s duty-free access to Mercado 

 Comum do Sul (Mercosul) markets on U.S. and Brazilian 

 agricultural exports globally.a

Source: Compiled by USITC staff. 

a

Mercosur is the standard abbreviation for the Spanish name of the South American customs union comprising full 

members Argentina, Brazil, Paraguay and Uruguay, and Mercosul is the corresponding Portuguese abbreviation. 

Because this report focuses on Brazilian exports, USITC staff opted to use the term Mercosul throughout.

SFC’s request letter, listed above (see appendix A). The remainder of chapter 1 presents a 

brief history of Brazilian policies impacting the farm sector, as well as the analytical 

framework underpinning the analysis on competitive factors used throughout the report. 

Products covered in this study include all existing or potential U.S. and Brazilian 

agricultural exports, with a specific focus on wheat (Harmonized Schedule (HS) 1001), 

corn (HS 1005), soybeans (HS 1201, 1208.10, 1507), and beef, pork, and poultry 

(HS chapters 2 and 16). All commodities in this study are defined to match products 

covered under the World Trade Organization (WTO) Agreement on Agriculture, part 

XIII, article 21. These include 768 6-digit product codes classified in HS chapters 1 to 24, 

excluding fish and fish products (HS chapter 3),6

 plus certain additional products in other 

HS chapters, such as milk proteins (HS chapter 35); hides, skins, and furs (HS chapters 

41 and 43); wool (HS chapter 51); and cotton (HS chapter 52). 

As requested by the SFC, information presented in this report (including trends in trade, 

production, and consumption) covers primarily the period 2006–10, although 2011 data 

 6

 Processed fish products classified in HS chapter 16 are also excluded from the WTO definition of 

agricultural products. 
1-5

are presented whenever available. Longer-term data are used to explain important 

historical trends. The study’s analysis of competitive factors and the modeling analysis of 

the effect of Brazilian trade measures are based on the latest available information and 

data. 

Approach 

As requested by the SFC, this report uses qualitative and quantitative tools to analyze the 

conditions of competition facing selected U.S. and Brazilian agricultural exports in thirdcountry markets. Data gathering for the report centered on a review of existing literature 

and interviews with U.S. government and agricultural sector sources, including 

representatives of individual firms, trade associations, and exporters.7

 USITC staff sought 

information from U.S. agricultural trade associations and U.S. firms with operations in 

Brazil, contacting more than 70 commodity- and sector-specific trade associations and 

companies. USITC staff held extensive meetings with U.S. government officials, 

including staff from USDA’s Economic Research Service (ERS) and Foreign 

Agricultural Service (FAS). Staff also traveled to Brazil in August and September 2011 

to meet with relevant Brazilian government officials, USDA officials, academic 

researchers, farmers, cooperatives and trade associations, exporters, and transportation 

and logistics officials. 

USITC staff also conducted research on Brazil’s trade and domestic policies that affect 

U.S. agricultural exports in selected third-country markets such as China, the EU-27, 

Japan, Korea, and Russia. Relevant trade and production data were obtained from Global 

Trade Information Services; the USITC’s DataWeb; Brazilian government Web sites, 

including those of Embrapa and the Ministries of Transportation and Agriculture; the 

United Nations’ Food and Agriculture Organization (FAO); and USDA. Information on 

Brazil’s tariffs and NTMs was obtained from the World Trade Organization (WTO), 

Organisation for Economic Co-operation and Development (OECD), World Bank, and 

USDA, as well as many private sector and academic sources. 

USITC staff used economic models to analyze the effects of removing NTMs on U.S. and 

Brazilian agricultural exports in selected third-country markets, as well as the effects of 

removing Brazil’s preferential tariffs (i.e., all of Brazil’s trade faced normal trade 

relations duties) under the Mercosul customs union on U.S. and Brazilian agricultural 

exports globally. The modeling analysis was based on an applied general equilibrium 

(AGE) model of world trade. This AGE simulation model focused on bilateral trade in 

food and agricultural products, including meat, grain, and oilseed products, among the 

United States, Brazil, and major third-country export markets. The AGE model used for 

the analysis was the Global Trade Analysis Project (GTAP) model, an economy-wide 

model of world trade specified at an aggregate product and sector level. The standard 

GTAP data have been disaggregated to allow analysts to estimate effects for specific 

products. The AGE model was also used to simulate the effects on U.S. and Brazilian 

exports of meat, grain, and oilseed products of preferential tariffs negotiated under 

Brazil’s free trade agreements. 

 7

 Appendix B of this report contains the Federal Register notices, and appendix C summarizes the 

views of interested parties. 
1-6

USITC staff analyzed the potential effects of NTMs using a three-step process. First, 

price gap data were developed. The existence of NTMs would likely raise prices of 

imports from the United States and Brazil and restrict the quantities imported. Thus, staff 

estimated the differences (“gaps”) between import prices paid in third-country markets 

and U.S. and Brazilian export prices for the products of interest. Second, USITC staff 

identified a subset of products for which available information pointed to the presence of 

NTMs that may raise prices or restrict quantities. For these products, positive price gaps 

were treated as representing the direct economic effects of NTMs. Third, these price gaps 

were introduced into the simulation-modeling framework as being equivalent to tariffs, 

and the effects of their removal were estimated. 

Recent History of Brazilian Agricultural Policies 

The strong expansion of Brazil’s agricultural sector during the last half of the 20th 

century and the first decade of the 21st century resulted in large part from a national 

economic development strategy designed by successive federal governments, starting in 

the 1930s and implemented over the next 70 years.8

 The strategy was based on several 

elements: farmland expansion to the Center-West and Northeast regions of the country, 

with infrastructure investments to support it; research and technology projects using 

primarily public funding; enhanced education for workers in the farm sector; and 

substantial migration (and immigration) to agricultural regions to support economic 

growth (figure 1.1). 

Internal migration and the expansion of Brazil’s agricultural frontier have been 

encouraged by the Brazilian government since the late 1950s, especially after land reform 

legislation was enacted in 1964. These reforms were largely designed to reduce social 

conflict in areas of southern Brazil where mechanized agriculture was expanding and to 

ensure Brazilian sovereignty over the Amazon region. Much of the agricultural expansion 

took place in the North and Center-West regions to open up frontier areas for export 

commodity production. Internal migration to the Center-West region, particularly to the 

state of Mato Grosso, continues today as a prominent feature of Brazilian society. 

Displaced Brazilian farm workers are encouraged by state and federal incentives to settle 

that region and provide labor for timber, ranching, and modernized agriculture.9

The opening of the Center-West region to agricultural production is one of several factors 

that gave rise to increasing Brazilian exports. Investment in agricultural research, 

removal of government price controls, and a more stable macroeconomic environment 

have also contributed to increasing agricultural trade since 2000.10 Before that time, 

Brazil was not a significant agricultural exporter. Brazil’s percentage of global 

agricultural exports, by value, declined from 4.0 percent in 1980 to 3.1 percent in 2000, 

as global agricultural exports grew 76 percent over the 20-year period and Brazil’s rate of 

increase was only half as large. But by 2009, the last year for which global FAO data are

 8

 Barros, “Brazil: The Challenges in Becoming an Agricultural Superpower,” 2009, 82. 9

 Wittman, “Agrarian reform and the production of locality: resettlement and community building in 

Mato Grosso, Brazil,” July/December 2005, 97-98, 101. 10 Nassar, “Brazil as an Agricultural and Agroenergy Superpower,” 2009, 55-80. 
1-7

FIGURE 1.1 Brazilian states can be grouped into five regions 

Source: Compiled by USITC staff. 

available, Brazil’s market share had risen to 5.6 percent of global agricultural exports. 

Much of the increase was in a limited set of products, including grains, soybeans, coffee, 

tobacco, cane sugar, meats, and certain horticultural products. With rates of production 

growth far exceeding growth in domestic consumption of those products, Brazil emerged 

as a leading global supplier.11 For instance, Brazilian exports of soybeans now account 

for more than one-quarter of global exports, while exports of broiler (chicken) meat 

account for over 35 percent.12

 11 Food and Agriculture Organization of the United Nations (FAO). FAOSTAT Database (accessed 

March 29, 2012). 12 Ibid. 
1-8

Brazilian government policies have been instrumental in shaping the current size and 

structure of Brazil’s agricultural and food products sector. Driven by considerations such 

as food security, inflation, and social cohesion, the goals and scope of these policies have 

changed over time, shifting away from government intervention to a more market-driven 

economy. 13 Thirty years ago, Brazil’s agricultural policies were largely focused on 

market intervention measures such as government purchases, price controls, high import 

duties, and export controls, but they now include more private sector participation in 

measures such as preferential lending, project financing, and agricultural research and 

development.14 

The total factor productivity of Brazilian farming doubled in the 30 years from 1975 to 

2005 and accounts for approximately 70 percent of the growth in farm output over the 

period.15 A strong contributing factor to Brazil’s productivity gains was the creation of 

Empresa Brasileira de Pesquisa Agropecuária (Embrapa) in 1973, under the Ministry of 

Agriculture, Livestock, and Food Supply. Embrapa is a national agricultural research 

agency encouraging cooperation between federal and state experiment stations to 

improve agricultural productivity and increase yields for a wide variety of crops and 

livestock. Today, Embrapa has 47 separate research centers throughout Brazil, each with 

a crop (e.g., soybeans, grains), ecosystem (e.g., cerrado, Amazon), or thematic (e.g., 

biotech, climate change, agro-energy) emphasis. Employees collaborate with foreign 

government agencies around the world, including USDA, Agricultural Research Service 

(ARS). 

Embrapa has contributed heavily to the adaptation of soybean, corn, and cotton varieties 

to Brazil’s acidic soils and regional climates. Embrapa’s scientists encouraged the use of 

large volumes of lime—as much as 5 metric tons (mt) per hectare (ha)—and gypsum to 

alter the acidic soils of the cerrado (Brazilian savannah).16 They also researched legumes 

and bacteria to fix nitrogen in the soils throughout Brazil and lessen the need for 

imported fertilizers.17 In recent years, Brazil’s rising farm labor costs, declining interest 

rates, and fresh farmland converted from the cerrado all favored mechanization and 

large-scale farming, particularly in newly settled areas in the Center-West region 

(figure 1.1). 

Analytical Framework for Competitive Factors 

To analyze the competitive factors affecting the Brazilian agriculture sector, the USITC 

developed an economic framework incorporating the analytical assumptions, parameters, 

and structure that define competitive conditions in agricultural trade. 18 Competitive 

conditions in agriculture encompass the economic, institutional, and regulatory 

environment in which firms compete. Competitive factors are defined as direct and 

indirect determinants of the ability of suppliers to offer products with the characteristics 

 13 Chaddad, Fabio, and Jank, “The Evolution of Agricultural Policies,” 2006, 86–88; Chadha, Rajesh, 

and Davenport, “Agricultural Policy Reform in the BRIC Countries,” February 2011, 7. 14 Chaddad, Fabio, and Jank, “The Evolution of Agricultural Policies,” 2006, 86. 15 Barros, “Brazil: The Challenges in Becoming an Agricultural Superpower,” 2008, 3. 16 See figure 2.1 for a map of the cerrado. 17 Economist, “Brazilian Agriculture: The Miracle of the Cerrado,” August 26, 2010. 18 USITC, Guidelines for Developing an Economic Framework for an ITC Study, 2008.
1-9

desired by buyers, who base their buying decisions on three main criteria: delivered cost, 

product differentiation, and reliability of supply.19 

In markets around the world, agricultural competitiveness is measured by comparing 

these criteria for domestically produced goods against those of imports, both in the 

domestic market and in third-country markets. In this report, particularly chapters 3, 4, 

and 6–10, the USITC’s analysis explores the relative importance of delivered cost, 

product characteristics, and reliability of supply in determining the competitiveness of 

Brazilian agricultural exports vis-à-vis U.S. competitors in third-country markets. 

Figure 1.2 identifies several specific competitive factors for agriculture.20

Delivered Cost 

For many globally traded agricultural products, delivered cost is the most important 

criterion in making purchasing decisions. For producers of these goods to be competitive 

in export markets, they must be able to supply the products to purchasers at or below the 

price offered by other exporters and domestic producers. The price competitiveness of 

these suppliers therefore depends on factors that tend to lower or raise their delivered 

costs vis-à-vis the delivered costs of other imported and domestic products in their home 

market. 

The delivered cost of domestically produced goods depends on the costs of producing the 

good and the cost of domestic transportation from production points to consumption 

points. Production costs in turn depend on the costs of inputs, such as fertilizer and 

wages. The use of biotechnology, such as in high-yielding seeds, and production 

technology, such as machinery and irrigation, also influences delivered cost. 

Transportation costs derive from several factors, including fuel costs and the efficiency of 

the transportation system, which in turn depends on such factors as the quality of roads 

and ports. Additional costs affect the overall delivered cost to export markets. These 

include the costs of international transportation, currency conversion, trade risk coverage, 

and tariffs in the foreign market. The delivered cost of exported goods also includes 

expenditures on import compliance, such as complying with sanitary and phytosanitary 

(SPS) standards, and meeting labeling and packaging requirements of third-country 

markets. 

 19 Several recent Commission fact-finding investigations concern competitive conditions affecting U.S. 

agricultural markets. Examples include USITC, Conditions of Competition for Milk Protein Products, 2004, 

and USITC, Canned Peaches, Pears, and Mixtures: Conditions of Competition, 2007. For a detailed 

discussion of the framework used in this report, see app. E of USITC, China’s Agricultural Trade: 

Competitive Conditions and Effects, 2011. 20 Figure 1.2 does not list government policies and foreign direct investment (FDI) as competitive 

factors because they have the potential to influence all three categories (delivered cost, product 

differentiation, and reliability of supply). For example, government programs or policies that subsidize credit 

to farmers or provide tax exemptions for producers lower the delivered cost of domestic products. 

Government-funded research and development, as well as government-mandated grades and standards 

requirements, offer a means of differentiating products. Government intervention can influence the reliability 

of supply by publicly funding or subsidizing marketing and transportation infrastructure, and by imposing 

supply and export controls on producers. See box 4.1 for further discussion of FDI’s impact on delivered 

cost, product differentiation, and reliability of supply. 
FIGURE 1.2 A broad range of factors affect competitiveness in agricultural markets 

Delivered cost Reliability of supply 

Production costs

Input costs for . Resource base . Wage rates . Capital . Water . Chemicals . Other Technology Labor productivity Industry structure 

Tariffs/fees

Transportation costs

Exchange rates

Proximity to market Transportation infrastructureMost favored nation (MFN) tariffs Preferential tariffs 

Market infosystemsTransportainfrastructu

Food safety/quality Health and nutrition Processor specifications Food labeling Packaging Product convenience 

Product differentiation 

Import compliance

Sanitary and phytosanitary standards Labeling/packaging 

Supplier coexport conOff-season 

Support services 

Product av

1-10 

Source: Compiled by USITC staff. 
1-11

Product Differentiation 

In addition to delivered cost, purchasers compare the level of product differentiation of 

domestically produced and imported products in making their buying decisions. The 

more processed and branded the product, the more likely product characteristics and 

reputation will form the basis of the purchasing decision, thereby making delivered cost 

less important. Similar products are differentiated from one another through their unique 

product characteristics, such as brand packaging, labeling, and their level of convenience, 

with the help of large investments in marketing, promotion, and media advertising. 

Reliability of Supply 

Reliability of supply refers to the ability of a supplier to deliver a specified product, of a 

particular quality and in an agreed-upon volume, to a specified location at a contracted 

time. Risks inherent in agricultural production (potentially impacting both the quantity 

and quality of supply) make this criterion particularly important for purchasers to 

consider. Products can be differentiated by their availability at different times of year, 

particularly when overseas suppliers are able to ship goods in the off-season to domestic 

consumers. Reliability of supply depends on the efficiency of the supply chain, including 

storage and transportation infrastructure, as well as market information systems. In 

agriculture, several factors may disrupt the reliability of supply, such as governmentimposed export controls, political unrest, poor transportation infrastructure, and unstable 

production quantities (owing to poor weather); these may in turn shrink a country’s 

exportable surplus. 
1-12

Bibliography 

Baer, Werner. The Brazilian Economy. London: Lynne Rienner Publishers, 2008. 

Barros, Geraldo. “Brazil: The Challenges in Becoming an Agricultural Superpower.” Chapter 4 in 

Brazil as an Economic Superpower? Understanding Brazil’s Changing Role in the Global 

Economy, edited by Lael Brainard and Leonardo Martinez-Diaz. Washington, DC: Brookings 

Institution Press, 2008. 

Central Intelligence Agency (CIA). CIA World Factbook: Brazil, updated October 21, 2011. 

https://www.cia.gov/library/publications/the-world-factbook/geos/br.html. 

———. CIA World Factbook: United States, updated October 21, 2011. 

https://www.cia.gov/library/publications/the-world-factbook/geos/br.html. 

Economist. “Brazilian Agriculture: The Miracle of the Cerrado,” August 26, 2010. 

Food and Agriculture Organization of the United Nations (FAO). FAOSTAT database (accessed various 

dates). http://faostat.fao.org/default.aspx. 

Global Trade Information Service, Inc. (GTIS). Global Trade Atlas database (accessed various dates).

http://www.gtis.com/english/GTIS_GTA.html (fee required). 

Graham, D. H., H. Gauthier, and J. R. Mendonca de Barros. “Thirty Years of Agricultural Growth in 

Brazil: Crop Performance, Regional Profile, and Recent Policy Review.” In Economic 

Development and Cultural Change 36, no. 1 (1987): 1–34. 

Matthey, H., J. F. Fabiosa, and F. H. Fuller. “Brazil: The Future of Modern Agriculture?” Midwest 

Agribusiness Trade Research and Information Center (MATRIC). MATRIC Briefing Paper 04-

MBP 6, May 2004. http://www.card.iastate.edu/publications/synopsis.aspx?id=521. 

Porter, Michael E. Competitive Advantage: Creating and Sustaining Superior Performance. New York: 

The Free Press, 1985. 

———. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: The 

Free Press, 1980. 

———. The Competitive Advantage of Nations. New York: The Free Press, 1990. 

U.S. Department of Agriculture (USDA). Foreign Agricultural Services (FAS). Production Supply and 

Distribution Online (PSD Online). http://www.fas.usda.gov/psdonline (accessed November 1, 

2011). 

U.S. International Trade Commission (USITC). Canned Peaches, Pears, and Mixtures: Conditions of 

Competition between U.S. and Principal Foreign Supplier Industries. USITC Publication 3972. 

Washington, DC: USITC, 2007. 

———. China’s Agricultural Trade: Competitive Conditions and Effects on U.S. Exports. USITC 

Publication 4219. Washington, DC: USITC, 2011. 
1-13

———. Conditions of Competition for Milk Protein Products in the U.S. Market. USITC Publication 

3692. Washington, DC: USITC, 2004. 

———. Guidelines for Developing an Economic Framework for an ITC Study. Office of Economics, 

2008. 

———. India: Effects of Tariffs and Nontariff Measures on U.S. Agricultural Exports. USITC 

Publication 4107. Washington, DC: USITC, 2009. 

Wittman, Hannah. “Agrarian reform and the production of locality: resettlement and community building 

in Mato Grosso, Brazil.” Revista Nera 8, no. 7 (July/December 2005): 94–111. 

http://www2.fct.unesp.br/nera/revistas/07/Wittman.PDF (accessed March 15, 2012).

World Bank. World Development Indicators database, 2011. 

http://data.worldbank.org/news/wdi-database-updated (accessed February 13, 2012).

2-1 

CHAPTER 2 

Brazil’s Agricultural Production, 

Consumption, and Trade 

 

Overview 

Agriculture is important to the Brazilian economy. In 2010, agricultural production 

contributed 6 percent to the country’s gross domestic product (GDP) and 20 percent to 

formal employment.1

 The sector consists of about 5 million farms, half of which are 

small, family operations that collectively produce only 7 percent of Brazil’s total 

agricultural output. About 1.6 million farms, however, are large commercial operations, 

mostly located in the vast savannah region (cerrado) of central Brazil and accounting for 

more than three-quarters of Brazil’s total agricultural production (figure 2.1).2

Brazil has abundant natural resources, including substantial arable land and nearly three 

times the freshwater reserves of the United States.3

 Brazil’s varied climates and soils 

support a diverse group of crops, in certain regions allowing two harvests each year (and 

in some areas, even three harvests with irrigation).4

 Over the past 20 years, the Brazilian 

agricultural sector has been transformed into a major, modern world producer, owing to 

better farming techniques, increased mechanization, and the widespread use of 

technology to improve yields. While planted area increased by 30 percent over the 

20-year period, crop production doubled. The doubling was a result of both higher yields 

and the expansion of farming into the cerrado, where considerable investment in capital 

equipment helped promote economies of scale.5

 In addition, public and private research 

entities, notably the Brazilian Agricultural Research Corporation (Embrapa),6

 developed 

seed varieties that are more productive and resistant to drought, acidic soil, pests, and 

diseases.7

 1

 CIA, The World Factbook: Brazil, July 5, 2011. Brazil’s GDP was $2,088 billion in 2010. World 

Bank, Data: Brazil (accessed May 4, 2011). 2 Economist, “Brazilian Agriculture: The Miracle of the Cerrado,” August 26, 2010, 4–5. A 

combination of grassland and woodland, the cerrado irregularly covers 10 of Brazil’s states: Goiás, Mato 

Grosso, Mato Grosso do Sul, Minas Gerais, São Paulo, Bahia, Piauí, Maranhão, Tocantins, and Rondônia. 

USDA, ERS, Brazil’s Cotton Industry: Economic Reform and Development, June 2011, 4. 3

 According to the United Nations Food and Agriculture Organization (FAO), Brazil had 264 million 

hectares (ha) (652 million acres) of agricultural land in 2009, compared with 403 million ha (995 million 

acres) in the United States. Agricultural land includes both cropland and pastureland. The FAO estimates that 

Brazil has the potential to increase its agricultural land to 400 million ha (988 million acres). FAO, 

FAOSTAT (accessed March 13, 2012); Economist, The Global Power of Brazilian Agribusiness, November 

2010, 4. 4

 Costa, Macedo, and Honczar, Brazilian Agribusiness, 2008, 7–8. 5

 The cerrado has an estimated 137 million ha (338 million acres) available for agricultural production. 

Economist, The Global Power of Brazilian Agribusiness, November 2010, 7; Matthey, Fabiosa, and Fuller, 

“Brazil: The Future of Modern Agriculture?” May 2004, 17. 6

 Embrapa is the world’s leading tropical research institution. Started as a public company in 1973, it is 

largely credited with turning the cerrado into viable cropland. Economist, “Brazilian Agriculture: The 

Miracle of the Cerrado,” August 27, 2010, 3. 7

 Costa, Macedo, and Honczar, Brazilian Agribusiness, 2008, 9. 
2-2 

FIGURE 2.1 The cerrado region comprises nearly one-quarter of Brazil’s total area 

Source: Government officials, interview by USITC staff, Brasilia, Brazil, August 26, 2011. The map was provided to USITC staff in 

a presentation by Embrapa officials. 

Today, Brazil is among the world’s top agricultural countries. As noted in chapter 1, 

according to the FAO, Brazil was the world’s leading producer of cane sugar, fiber crops, 

coffee, oranges, and edible beans in 2009/10, and among the top three producers of beef, 

cattle hides, poultry, soybeans, corn, and tobacco.8

Brazil is also one of the world’s leading consumers of meats, grains, and oilseeds. 

Brazil’s rapidly rising per capita income has led to two significant consumption trends: a 

sharp increase in domestic consumption of almost all agricultural products, and a shift in 

consumption away from traditional staple foods, such as grains, pulses, and tubers, 

toward non-staples such as vegetables, fruits, oils, meats, and dairy products. Rising 

 8

 FAO, FAOSTAT (accessed February 15, 2012). 
2-3 

domestic food demand has led many Brazilian producers to shift their marketing efforts 

toward supplying the domestic market, reducing the supply available for export. 

Nonetheless, Brazil is a major exporter of agricultural products. During 2006–10, Brazil 

accounted for almost 9 percent of global agricultural exports, making it the world’s thirdlargest agricultural exporter, behind only the European Union (EU-27) and the United 

States. Between 2006 and 2011, Brazilian agricultural exports to the world grew 

123 percent, from $36.6 billion in 2006 to $81.7 billion in 2011 and representing close to 

a third of total Brazilian exports. Exports are concentrated in a few major commodities, 

with soybeans, soybean meal and oil, sugar, and coffee accounting for a little more than 

50 percent of total agricultural exports during the six-year period, and poultry and beef 

accounting for an additional 19 percent. Tobacco products and corn are also important 

Brazilian exports. In contrast to its position as a global exporter, Brazil was the world’s 

20th-largest importer of agricultural products during 2006–10, although between 2006 

and 2011 its imports more than doubled to reach a record $11 billion in 2011. Major 

Brazilian agricultural imports include wheat and milled grains, certain vegetable oils, 

processed vegetables, and fresh fruit. 

Although Brazil and the United States are leading global exporters of many of the same 

products, direct competition between the two countries is limited. For example, both 

countries supply China with soybeans; however, the rapid growth of Chinese soybean 

demand has allowed both countries to expand exports. Brazil’s major markets for 

soybean meal are the EU-27, Thailand, and Korea, while the United States focuses on 

Canada and Mexico. In poultry, while Brazil and the United States are the world’s 

leading suppliers, the top five markets for each country (except for Hong Kong) do not 

overlap. This is because Brazilian poultry is produced and packaged with specific 

customers in mind, while the United States tends to offer undifferentiated, bulk poultry 

products. And although the United States is the world’s third-largest global beef exporter, 

competition with Brazil is minimized for two reasons. First, the United States and Brazil 

serve different market segments: the United States supplies grain-fed beef destined for 

Canada, Mexico, Japan, and Korea, while Brazil supplies grass-fed beef used in 

manufactured beef products. Second, for regulatory reasons, Brazilian beef lacks access 

to many of the largest U.S. export markets, such as Japan and Korea. 

Agricultural Production 

Regional Farm Characteristics 

Farming in Brazil was traditionally concentrated in the Southern and Southeastern states 

of São Paulo, Paraná, Santa Catarina, and Rio Grande do Sul, areas with nutrient-rich 

soil, sufficient water resources, and adequate infrastructure. But by the 1960s, inflated 

land values hampered agricultural expansion in these areas. Through a series of 

government incentives in the 1970s and 1980s, including low-cost credit and high 

support prices for wheat, farmers began buying cheaper land in the cerrado (figure 2.1) 

(specifically the Center-West states of Mato Grosso and Mato Grosso do Sul) for wheat 

production.9

 In contrast to the temperate climate of the South, the cerrado is tropical. 

 9

 Matthey, Fabiosa, and Fuller, “Brazil: The Future of Modern Agriculture?” May 2004, 2. 
2-4 

While its flat topography was ideal for crops, the region’s acidic, thin soil had initially 

discouraged large-scale expansion of crop production. Instead, ranchers had moved into 

the region, grazing their herds on the unused pastureland. 

In the early 1980s, advances in technology developed by Embrapa (including artificial 

soil enrichment and soybean seeds engineered for a tropical climate) revolutionized 

farming techniques and, coupled with the high price of soybeans, led to the expansion of 

crop production in the cerrado.

10 Embrapa further helped to boost yields in the region by 

developing “short cycle” plants that enabled two crops to grow annually on the same 

parcel.11 Farmers in the cerrado used no-till cultivation to mitigate the erosion of soil, 

and faced fewer pest problems than in the Southeast because of the limited duration of 

crop production.12 These developments allowed farmers to expand production beyond 

soybeans, including widespread use of corn in the second harvest to meet increased 

demand for swine and poultry feed. Supported by high prices, cotton also became 

commonplace in the cerrado beginning in the mid-1990s.13

While the Southern and cerrado states differ in farm size, climate, and cropping patterns, 

each region’s farmers are well adapted to their environment. The South and Southeast 

regions have higher population densities. As a result, land is expensive and farms are 

generally small—30 hectares (ha) (74 acres) or less, on average; are less mechanized than 

those in the cerrado; and are more likely to depend on government-subsidized credit.14

Cooperatives often help to mitigate small farmers’ production challenges, such as a lack 

of credit for purchasing inputs, by allowing small farming operations to buy, sell, and 

transport goods collectively.15 In contrast, farms in the cerrado benefit from economies 

of scale through size and mechanization. Farms in this region are primarily large and 

commercial—more than 65 percent are larger than 1,000 ha (2,470 acres)—and are 

continuing to consolidate. Multinational corporations supply the technology and the 

international lines of credit necessary to create highly sophisticated operations capable of 

competing in international markets.16 While many cerrado states such as Mato Grosso 

and Goiás are continuing to experience rapid growth, agricultural expansion in the region 

could slow in the future. The development of potential roadblocks, including demands for 

reform by the landless poor, expansion of indigenous reservations, environmental 

concerns about deforestation, and the uncertainty of tree-planting stipulations required by 

Brazil’s Forest Code, might favor the northeastern savannah lands in states such as Bahia 

as areas of strong agricultural growth.17

 10 Use of export embargoes by the United States on crops including soybeans is also believed to have 

encouraged the expansion of crop production in the cerrado. Faminow and Hillman, “Embargoes and the 

Emergence of Brazil’s Soybean Industry,” 1987. 11 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011; Economist, 

“Brazilian Agriculture: The Miracle of the Cerrado,” August 27, 2010, 4. 12 Matthey, Fabiosa, and Fuller, “Brazil: The Future of Modern Agriculture?” May 2004, 2–3. 13 Ibid., 5. 

14 Ibid., 3–5. 

15 USDA, ERS, Agriculture in Brazil and Argentina: Developments and Prospects, November 2001, 41. 16 Matthey, Fabiosa, and Fuller, “Brazil: The Future of Modern Agriculture?” May 2004, 3–5. 17 Matthey, Fabiosa, and Fuller, “Brazil: The Future of Modern Agriculture?” May 2004, 18. Almost 

50 percent of arable land belongs to 1 percent of the population. Economist, Brazil Agriculture: Landless 

Peasants Take Farms, Government Buildings, January 12, 2011. See chapter 3 of this study for further 

discussion of the Forest Code. Industry representative, interview by USITC staff, São Paulo, Brazil, 

August 23, 2011. 
2-5 

General Production Patterns 

Though Brazilian agriculture has been thriving for decades, it experienced an especially 

strong expansion between 1995 and 2005, owing to economic reforms and liberalization 

by the government that increasingly led farmers to source capital, inputs, and technology 

from international investors. 18 In addition to growth in agricultural output and 

productivity, Brazil has experienced a gradual shift in the composition of agricultural 

production. Specifically, land planted with traditional, labor-intensive plantation crops 

(including bananas, tobacco, and citrus) has been redirected to crops made less laborintensive through technology, such as soybeans, cotton, sugar cane, and corn. 19 The 

tropical climate and acidic soils of the cerrado once limited production of many such 

crops, but Brazilian scientists and farmers overcame these limitations by using lime and 

fertilizers, as well as developing new regional seed varieties. Technology has also played 

an important role: the use of genetically modified (GM) crops was legalized in 2004, and 

by 2009, Brazil was the second-largest grower of biotech crops in the world.20

In 2010, the value of Brazil’s total crop production reached $R154 billion 

($87.4 billion), 21 9 percent more than the previous year, owing to high prices for 

exports. 22 Combined, the top three products represented just over half of total crop 

production value: soybeans (24 percent), sugar cane (18 percent), and corn (10 percent). 

By both value and planted area, soybeans were the dominant crop throughout 2006–10, 

with corn and sugar cane alternating between second and third place. While these three 

products are dominant nationally, other products, such as oranges and rice, account for a 

large percentage of production in certain states (figure 2.2). 

Total planted area for all crops remained stable over the past five years at around 

65 million ha (161 million acres), but production still increased as a result of rising 

investment, adoption of technology, and a favorable climate. Overall, pastureland for 

livestock fell slightly (by about 3 percent) over the past decade, but this decrease was 

concentrated in the South and Southeast, where pastureland has been converted to row 

crops (soybeans, corn, and edible beans) and sugar cane production. This loss was 

somewhat offset by an increase in pasture in the North region, where in some cases land 

is being cleared for cattle ranching.23 

 18 USDA, ERS, Brazil’s Cotton Industry: Economic Reform and Development, June 2011, 13. 19 Friedman, “The Geopolitics of Brazil: An Emergent Power’s Struggle with Geography,” July 2011, 9. 20 With 21.4 million ha (52.9 million acres) planted, Brazil was second only to the United States, which 

cultivated 64 million ha (158 million acres) of GM crops in 2009. The Ecologist, “Brazilian GM Crop Surge 

Reported,” February 23, 2010. 21 The international symbol for the Brazilian real (or its plural, reais) is R$. In this report, we use $ to 

denote U.S. dollars. In the text, USITC staff has converted reais to dollars using IMF exchange rates for the 

applicable period. 22 The value of Brazil’s crop production includes the value of 64 different permanent and annual crops, 

but it does not include the value of many further processed or value-added food products. This may account 

for the difference in the value of farm production shown in table ES.1 and the value referenced here. IGBE, 

Municipal Agricultural Production 2010, October 2011. 23 Brazil has the world’s largest commercial cattle herd, occupying an estimated 84.6 million ha. 

Economist, “Brazilian Agriculture: The Miracle of the Cerrado,” August 27, 2010; Economist, Brazil 

Agriculture: Less Smoke, Less Ire, September 24, 2010; Soybean and Corn Advisor, Inc., “Brazil Land 

Utilization,” n.d. 
2-6 

FIGURE 2.2 Brazil’s crop production extends countrywide and includes many commodities besides corn and 

soybeans 

Source: Brazilian Institute of Geography and Statistics (IBGE).

 
2-7 

Recent Production Trends 

During marketing years spanning 2006/07–2010/11, production of most commodities 

grew, (table 2.1).24 Increases in production were large for commodity exports, including 

sugar, cotton, and coffee, for which export volumes rose by 22 percent, 29, percent, and 

24 percent, respectively, between 2006/07 and 2010/11.25 A 28 percent increase in the 

production of oilseeds between 2006/07 and 2010/11 was mainly driven by rising 

demand, largely from China. Production of grains increased by 20 percent over the 

period, driven by growth in corn and wheat production for animal feed. Overall meat 

production increased by 16 percent, and the highest percent gain was achieved by broiler 

production, which grew by 31 percent between 2006/07 and 2010/11, owing to a 

combination of increased consumer demand and rising exports. 

Oilseeds 

Soybeans are by far the primary oilseed produced in Brazil. Soybean production rose 

from 59.0 million metric tons (mt) in 2006/07 to 75.5 million mt in 2010/11, an average 

annual increase of 6 percent. This expansion was primarily driven by a steady increase in 

annual yields, which is the result of improved seeds, technology, and equipment, as well 

as better soil management practices.26 Also, higher demand from China and low prices 

for corn contributed to an increase in area planted to soybeans over the period. 27

Although Brazil is the world’s largest non-GM soybean producer, GM soybeans 

accounted for 80 percent of production in 2010/11; however, this percentage varies 

significantly by region.28

Brazilian production of soybean oil and meal grew by about 4 percent annually between 

2006/07 and 2010/11 in response to rising demand for animal feed by Brazil’s growing 

livestock sector. The poultry industry uses one-quarter of Brazil’s soybean meal 

production, followed by the swine industry which accounts for another 16 percent.29

Also, demand for biodiesel, for which soybean oil is the primary feedstock, has been 

growing since the government increased its mandate for biofuel production in 2011.30 

Grains 

During 2006/07–2010/11, total Brazilian grain production increased by 5 percent 

annually. Corn was produced in the greatest volume, peaking at 59 million mt in 2007/08. 

Corn production grew at an average annual rate of 3 percent, and 13 percent overall for

 24 The marketing year is a 12-month period, usually beginning with a new harvest, during which the 

product is marketed. Marketing years differ for each commodity and country. 25 GTIS, Global Trade Atlas database (accessed February 12, 2012). 26 USDA, FAS, Brazil: Oilseeds and Products; Annual, April 4, 2011, 2. 27 Economist, The Global Power of Brazilian Agribusiness, November 2010, 12. 28 For example, in Mato Grosso, conventional soybeans accounted for close to 40 percent of the total 

state production in 2011. Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 31, 

2011; industry representative, interview by USITC staff, Paraná, Brazil, August 31, 2011; USDA, FAS, 

Brazil: Oilseeds Annual Report 2011, April 4, 2011, 8. 29 USDA, FAS, Brazil: Oilseeds and Products; Annual, April 4, 2011, 6. 30 About 80 percent of Brazilian biodiesel production comes from soybeans. Industry representative, 

interview by USITC staff, São Paulo, Brazil, August 22, 2011; USDA, FAS, Brazil: Oilseeds and Products; 

Annual, April 4, 2011, 7. 
2-8 

TABLE 2.1 Brazil: Agricultural production of selected products, marketing years (MY) 2006/07–2010/11 

 2006/07 2007/08 2008/09 2009/10 2010/11 

Average

annual change 

2006/07–2010/11

 Million mt Percent

Oilseeds 

 Soybean 59.0 61.0 57.8 69.0 75.5 6.4

 Cottonseed 2.6 2.7 2.0 2.0 3.4 6.9

 All oilseeds 62.0 64.3 60.3 71.4 79.3 6.3

Meals 

 Soybean 24.1 24.9 24.7 26.1 27.9 3.7

 Cottonseed 1.0 1.1 0.9 1.0 1.4 8.8

 All meals 25.3 26.1 25.8 27.2 29.4 3.8

Vegetable oils 

 Soybean 6.0 6.2 6.1 6.5 6.9 3.6

 All vegetable oils 6.6 6.9 6.8 7.1 7.7 3.9

Grains 

 Corn 51.0 58.6 51.0 56.1 57.5 3.0

 Rice, milled 7.7 8.2 8.6 7.9 9.3 4.8

 Wheat 2.2 3.8 5.9 5.0 5.9 28.0

 Sorghum 1.6 1.4 2.0 1.9 2.3 9.5

 All grains 63.1 72.5 67.9 71.4 75.6 4.6

Meats 

 Poultry (broiler) 9.4 10.3 11.0 11.0 12.3 7.0

 Beef and veala

 9.0 9.3 9.0 8.9 9.1 0.3

 Porka

 2.8 3.0 3.0 3.1 3.2 3.4

 Poultry (turkey) 0.4 0.5 0.5 0.5 0.5 5.7

 All meats 21.6 23.1 23.5 23.6 25.1 3.8

Fresh fruit 

 Orangesb 18.5 16.9 17.0 15.4 20.6 2.8

 Grapes 1.3 1.4 1.3 1.3 1.3 0.0

 Apples 1.0 1.1 1.2 1.3 1.2 4.7

 All fresh fruit 21.0 19.4 19.6 18.1 23.0 2.3

Other 

 Green coffeec

 36.1 46.7 39.1 53.3 44.8 5.5

 Sugar 31.5 31.6 31.9 36.4 38.4 5.1

 Fluid milk 25.2 26.8 27.8 28.8 29.9 4.4

 Cottond

 7.0 7.4 5.5 5.5 9.0 6.5

 Orange juice 1.5 1.3 1.3 1.1 1.4 –1.7

Source: GTIS, Global Trade Atlas database (accessed February 10, 2012). 

a

Carcass weight equivalent. 

b

Fresh orange production includes oranges destined for processing and the fresh market. c

1,000 60-kg bags. dMillion 480-lb. bales. 

the period in response to high international prices and increased domestic demand for 

swine and poultry feed, of which corn is a major component.31 Over the past decade 

Brazilian corn yields rose owing to the increased use of fertilizer, better soil conditions, 

and expanded use of GM seeds.32 In 2010/11, 44 percent of the first corn crop was 

genetically modified, compared with 5 percent in 2008, when GM corn was officially 

approved for use.33

 31 Industry representative, interview by USITC staff, Brasilia, Brazil, August 24, 2011; USDA, FAS, 

Brazil: Grain and Feed; Annual, March 16, 2011, 4. 32 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 33 USDA, FAS, Brazil: Grain and Feed; Annual, March 16, 2011, 3. 
2-9 

Wheat production averaged annual growth of nearly 28 percent over the past five years. 

In 2010/11, average yields rose by 30 percent over the previous year because of good 

weather.34 The three Southern states accounted for more than 92 percent of Brazil’s total 

wheat production in 2009. 35 In many cases, wheat is double-cropped after corn or 

soybeans.36

Between 2006/07 and 2010/11, rice production grew by about 5 percent annually. Over 

the past five years, production has moved away from the Center-West region toward 

irrigated production in the South as low prices and a global glut of rice have made the 

crop less profitable in the Center-West region than other major crops, particularly 

soybeans.37 The Southern state of Rio Grande do Sul accounted for about 60 percent of 

Brazil’s rice production in 2010/11.38

Coffee 

Brazil leads the world in coffee production and exports. While production fluctuated over 

the period, it grew on average by 5.5 percent annually between 2006/07 and 2010/11 

(table 2.1). The biennial cycle of arabica bean production, the predominant species grown 

in Brazil, affected both area harvested and yields. While area planted remained fairly 

consistent over the period, the number of fruit-bearing trees increased from 6.3 billion in 

2006/07 to 6.6 billion in 2010/11.39 Improved crop management, tree replacement with 

improved varieties, and better use of technologies (like irrigation) all contributed to the 

increase in production over the period. Coffee production is concentrated in the 

Southeast, with Minas Gerais accounting for more than 45 percent of Brazilian 

production during 2006/07–2010/11, followed by Espírito Santo and São Paulo.40

Sugar41

Brazil was the world’s largest producer and exporter of sugar between 2006/07 and 

2010/11.42 During this period, Brazilian production of sugar increased by 22 percent, 

while area harvested increased by 45 percent.43 Production was once centered in the 

Northeast region, but shifted to the Southeast for its more favorable climate, good soil, 

and proximity to the consumer market.44 São Paulo accounts for a significant share of 

Brazilian sugar production (nearly 60 percent throughout the period45), but some of the 

recent growth in production has been in the Center-West and Minas Gerais, where land is 

relatively affordable. 46 Additionally, domestic prices for sugar increased sharply in 

2010/11 as a result of high international sugar prices and reduced supply after poor 

 34 USDA, FAS, Brazil: Grain and Feed; Annual, March 16, 2011, 9. 35 IBGE, Municipal Agricultural Production 2009, October 2010. 36 Industry representative, interview by USITC staff, São Paulo, Brazil, August 22, 2011. 37 USDA, FAS, Brazil: Grain and Feed; Annual, March 18, 2009, 15–16. 38 USDA, FAS, Brazil: Grain and Feed; Quarterly, October 31, 2011, 6. 39 USDA, FAS, Brazil: Coffee and Products; Annual, May 9, 2011, 4. 40 IBGE, Municipal Agricultural Production 2009, October 2010. 41 Brazil produces sugar cane. The United States produces both sugar cane and sugar beets. 42 McConnell, Dohlman, and Haley, “World Sugar Price Volatility Intensified,” September 2010, 30. 43 USDA, FAS, Brazil: Sugar and Products; Annual, April 14, 2011, 2. 44 Costa, Macedo, and Honczar, Brazilian Agribusiness, 2008, 59. 45 Because land in São Paulo state is relatively expensive, the share of land there dedicated to soybeans 

declined over the past five years as more land was allocated to sugar cane. 46 USDA, FAS, Brazil: Sugar and Products; Annual, April 14, 2011, 2. 
2-10 

weather in Brazil hampered production in 2008/09.47 Close to one-half of Brazilian sugar 

is used for the production of ethanol. The principal factors driving the expansion of sugar 

cane in Brazil are increasing domestic and international demand for renewable energy 

(particularly ethanol) as a response to high oil prices, high global sugar prices, an 

expansion of arable land, technological advancements in new sugar cane varieties, and 

government price support.48 

Meats 

In 2010/11, chicken accounted for nearly half of total meat production in Brazil. 

Production increased by 31 percent over the past five years in response to strong demand 

attributable to rising domestic per capita income, the competitive price of broiler meat 

compared with beef, higher demand from the food service industry for frozen and 

precooked chicken products, and greater demand for Brazilian poultry by China and 

Hong Kong.49

Beef production remained stable over the period, increasing by 1 percent between 

2006/07 and 2010/11. Production declined slightly in both 2008/09 and 2009/10 as the 

global economic crisis reduced export volumes, although the effect of the crisis was 

mitigated somewhat by higher domestic consumption. 50 In addition, the strong real

reduced the competitiveness of Brazilian exports of beef during the period.51 

Between 2006/07 and 2010/11, Brazilian production of pork rose by about 14 percent, 

primarily as a result of stronger domestic demand but also due to increased exports. 

Domestic demand for pork rose over the period, owing to a strong public campaign by 

the domestic pork council and prices that were competitive with beef, while production 

benefited from stability in feed prices resulting from increased corn production.52 Hog 

production in the Center-West (principally Mato Grosso) ramped up in 2007 as a result of 

domestic and international investment.53 Still, in 2009 about 68 percent of Brazilian 

swine were slaughtered in three Southern states, which remain the primary production 

hub.54 

Cotton 

Brazilian production of cotton registered a net increase over the period, from 7 million 

bales in 2006/07 to 9 million bales in 2010/11. Production reached a record in 2007/08, 

but fell in the subsequent two marketing years owing to falling cotton prices as a result of 

global financial conditions, a reduction in planted area, and heavy rainfall that lowered 

 47 USDA, FAS, Brazil: Sugar and Products; Annual, April 14, 2011, 10; McConnell, Dohlman, and 

Haley, “World Sugar Price Volatility Intensified,” September 2010, 33. 

48 USDA, ERS, Sugar and Sweeteners Outlook, June 4, 2007, 36. 49 USDA, FAS, Brazil: Poultry and Products; Annual, September 28, 2007, 5; USDA, FAS, Brazil: 

Poultry and Products; Semi-Annual, February 3, 2011, 2. 50 USDA, FAS, Brazil: Livestock and Products; Annual, September 22, 2009, 4. 51 USDA, FAS, Brazil: Livestock and Products; Annual, August 30, 2010, 5. 52 Costa, Macedo, and Honczar, Brazilian Agribusiness, 2008, 83–87. 53 USDA, FAS, Brazil: Livestock and Products; Annual, August 25, 2006, 8. 54 IBGE, Municipal Agricultural Production 2009, October 2010. 
2-11 

yields.55 In 2010/11, planted area increased by 38 percent over the previous year in 

response to good domestic and international prices and a favorable climate for cotton 

production in Mato Grosso, the top producing state.56 Since the 1990s, cotton production 

has shifted from the South and Southeast to the cerrado, owing to good soil, flat land 

suited to mechanization, and intensive use of technology.57 GM cotton was introduced in 

2005 and widespread plantings began in 2006/07; GM seeds are expected to account for 

the majority of the cotton crop in the near future.58 Despite continued production growth 

in the cerrado, cotton requires many inputs and expensive, specialized machinery, which 

raise its production cost relative to soybeans and corn, and may dampen growth of cotton 

production in the future. 

Oranges and Orange Juice 

Brazil is both the largest orange producer in the world and the largest orange juice 

exporter, with export values more than three times that of the United States, the secondlargest orange juice producer and exporter. Overall production of fresh oranges increased 

in Brazil by about 11 percent between 2006/07 and 2010/11. Production dropped to a 

six-year low of 15.4 million mt in 2009/1059 as a result of poor weather, lower investment 

in crop management due to low prices,60 and the continued spread of citrus greening 

disease in the main production areas of São Paulo and Minas Gerais.61 Orange production 

rebounded to 20.6 million mt in 2010/11 thanks to a large second blossoming induced by 

water stress—a result of dry conditions the previous crop year. Although area planted to 

oranges has fallen in the past five years (particularly due to the expansion of acreage 

devoted to sugar cane in São Paulo),62 overall tree numbers have remained relatively 

constant due to higher planting densities. São Paulo state accounts for nearly threequarters of annual Brazilian orange production, and for virtually all orange juice 

processing and exports.63 Despite a larger orange crop in 2010/11 compared to 2006/07, a 

greater share of production was diverted to the fresh market, resulting in a 3 percent 

decline in orange juice production. Brazilian orange juice production consists almost 

entirely of Valencia oranges, an ideal juicing variety because of its deep color and high 

sugar and juice content.64 The largest Brazilian orange juice export markets in 2011 were 

the EU-27, the United States, Japan, and China.65 

 55 USDA, ERS, Brazil’s Cotton Industry: Economic Reform and Development, June 2011, 21; IBGE, 

Municipal Agricultural Production 2009, October 2010. 56 USDA, FAS, Brazil: Cotton and Products Update, November 30, 2010, 2–3. 57 USDA, ERS, Brazil’s Cotton Industry: Economic Reform and Development, June 2011, 3; Embrapa, 

“Cotton Culture in the Cerrado” (accessed November 10, 2011). 58 USDA, ERS, Brazil’s Cotton Industry: Economic Reform and Development, June 2011, 8. 59 USDA, FAS, PSD Online (accessed February 2, 2011). 

60 USDA, FAS, Brazil: Citrus Semi-annual, June 15, 2010, 3. 61 Citrus greening, also called huanglongbing, is a bacterial disease spread by psyllid insects that 

greatly reduces fruit production and yields and can kill citrus trees within a few years of infection. According 

to the USDA, more than 50 percent of sampled orange production blocks in São Paulo were affected by 

greening in 2011, although fewer than 4 percent of trees were affected. USDA, FAS, Brazil: Citrus Annual, 

December 7, 2011, 4. 62 IBGE, Municipal Agricultural Production 2009, October 2010. 63 Ibid. 

64 Industry representatives, interviews by USITC staff, Florida, November 16–17, 2011. 65 GTIS, Global Trade Atlas database (accessed February 8, 2012). 
2-12 

Edible Dry Beans 

Brazil is the world’s largest producer of dry beans, accounting for 17 percent of global 

production in 2009. 66 While area planted fluctuated over the past five years, annual 

production stabilized between 3.3 and 3.5 million mt annually.67 In contrast to other 

commodity crops grown in Brazil, family farmers produce roughly 70 percent of the dry 

bean crop. 68 However, although small-scale producers dominate bean production, 

medium-sized and large producers are becoming increasingly successful, especially in the 

cerrado which has benefited from research, good land quality, and the use of irrigation.69

The adoption of modern planting techniques in the Northeast has also raised productivity 

there and shifted some bean production from the South.70 Because beans can be planted 

in three seasons (dry, wet, and winter), they are grown in most states. This causes great 

variation in yields, as each region employs different planting techniques that are suited to 

the climate.71 Unlike most other major crops, beans are produced mostly for the local 

market; exports are limited.72

Agricultural Consumption 

Brazil is one of the world’s leading consumers of meats, grains, and oilseeds. It ranks 

third in global consumption of beef, broilers, turkey, and soybean oil.73 Average Brazilian 

per capita consumption is in excess of 3,100 calories per day, one of the highest levels 

among South and Central American countries.74 As noted earlier, over the past several 

years, Brazil’s rapidly rising per capita income has not only led to sharp increases in 

domestic consumption of almost all agricultural products, but also to a shift in 

consumption away from traditional staple foods such as grains, pulses, and tubers, toward 

non-staple food products such as vegetables, fruits, oils, and especially meats and dairy 

products (table 2.2).75 For example, although the per capita daily consumption of calories 

increased by only 15 percent between 1987 and 2009, consumption of meat increased by 

62 percent over this period.76

Rising domestic food consumption is leading agricultural producers to shift their 

marketing strategies toward the growing domestic market, as higher demand by both 

restaurants and retail consumers is raising domestic prices above those in export 

 66 USDA, FAS, PSD Online (accessed October 5, 2011). 

67 USDA, FAS, Brazilian Dry Bean Production, December 8, 2010, 1. 68 Ibid., 2. 

69 Ibid., 4. 

70 In 2011, a new GM seed for dry edible beans was approved which was developed in Brazil. Korves, 

“Brazil Approves Biotech Dry Beans,” September 22, 2011; industry representative, interview by USITC 

staff, Paraná, Brazil, August 31, 2011; USDA, FAS, Brazilian Dry Bean Production, December 8, 2010, 2, 4. 71 USDA, FAS, Brazilian Dry Bean Production, December 8, 2010, 4. 72 Korves, “Brazil Approves Biotech Dry Beans,” September 22, 2011. 73 Brazil accounts for 14 percent of global consumption of beef, 12 percent of global consumption of 

broilers, 7 percent of global consumption of turkey, and 13 percent of global consumption of soybean oil. 

USDA, FAS, PSD Online (accessed June 21, 2011, and October 6, 2011). 74 Of Central and South American countries, only Mexico (3,266 per capita per day) has a higher 

caloric intake than Brazil. In comparison, daily caloric intake in the United States is 3,748 calories. FAO, 

FAOSTAT (accessed May 7, 2011). 75 Valdes, Lopes, and Lopes, “Brazil’s Changing Food Demand Challenges the Farm Sector,” Second 

Quarter, 2009; FAO, FAOSTAT (accessed May 7, 2011). 76 FAO, FAOSTAT (accessed February 15, 2012). 
2-13 

TABLE 2.2 Brazil: Agricultural consumption of selected products, MY 2006/07–2010/11

2006/07 2007/08 2008/09 2009/10 2010/11 

Average

annual change

2006/07–2010/11

 Million mt (except as noted) Percent

Grains 

 Corn 41.0 42.5 45.5 47.0 49.5 4.8

 Wheat 10.3 10.3 10.7 11.0 10.8 1.2 

 Rice 8.4 8.4 8.4 8.5 8.4 0.0 

 Sorghum 1.5 1.4 1.9 1.9 2.3 11.4

 All grains 62.0 63.3 67.3 69.2 71.9 3.8

Oilseeds 

 Soybeans 34.0 35.1 34.7 36.8 39.2 3.6

 Cottonseed 2.5 2.7 2.1 2.0 3.2 6.1

 All oilseeds 36.8 38.1 37.0 39.1 42.7 3.8 

Meals 

 Soybean meal 11.1 12.3 12.4 12.8 13.4 4.9 

 Cottonseed meal 1.0 1.1 0.9 1.0 1.4 7.2 

 All meals 12.3 13.5 13.5 13.9 14.9 5.0 

Edible oils 

 Soybean oil 3.4 4.0 4.3 5.1 5.3 11.6

 All edible oils 4.2 4.8 5.2 6.1 6.4 11.2

Meats 

 Poultry (broiler) 6.9 7.4 7.8 8.0 9.1 7.4 

 Beef and veala 7.0 7.1 7.3 7.4 7.6 2.2 

 Porka

 2.2 2.3 2.4 2.4 2.6 4.1 

 All meats 16.2 17.1 17.7 18.1 19.6 4.9 

Other 

 Coffee, greenb

 15.9 16.7 17.4 18.0 18.8 4.2

 Sugar 10.8 11.4 11.7 11.8 12.0 2.7 

 Fluid milk 25.2 26.8 27.8 28.8 30.0 4.4

 Oranges 4.6 5 5.3 4.8 6.4 8.7

 Cottonc 4.4 4.5 4.1 4.3 4.2 –1.6

Source: USDA, FAS, PSD Online (accessed June 21, 2011). 

a

Carcass weight equivalent. 

b

1,000 60-kg bags. 

c

Million 480-lb. bales. 

 

markets.77 For instance, one Brazilian poultry producer cut exports significantly, from 

45 percent of total production in 2009 to 30 percent in 2011, in order to take advantage of 

relatively higher domestic prices.78 In the livestock sector, one company reported that 

products offered in the domestic market brought higher prices than in export markets, in 

part owing to high demand for meat by Brazilian restaurants. 79 JBS, another major 

livestock producer, increased its domestic slaughter and packaging capacities 

considerably in 2009, indicating a longer-term commitment to the Brazilian market.80 As 

Brazil’s food consumption continues to rise, agricultural production will have to increase 

significantly if it is also to continue to supply a growing number of consumers in global 

export markets. 

 77 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 78 Industry representative, interview by USITC staff, Paraná, Brazil, September 1, 2011. 79 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 80 JBS, JBS Annual Report 2009, August 12, 2010, 5. 
2-14 

Recent Consumption Trends 

Between 2006/07 and 2010/11, Brazilian consumption of almost all agricultural products 

grew in volume, although rates of growth differed among commodity groups (table 2.2). 

During this period, consumption of edible oils rose significantly (11 percent average 

annual increase), but started from a small base. Domestic soybean oil consumption grew 

both for biodiesel production and for use in cooking.81 Consumption of oilseeds and 

oilseed products rose over the past five years, with consumption of soybeans, cottonseed, 

soybean meal, and cottonseed meal all registering overall increases of 15 percent or 

more. Stronger demand for meat by Brazilian consumers fueled rising consumption of 

soybeans and meals, which are ingredients for livestock feed. Among the grains, the 

volume of corn consumption increased the most, rising by almost 10 million mt between 

2006/07 and 2010/11. Corn is a major component of feed for the thriving poultry and 

pork sectors. While consumption of all meats rose during the period, poultry in particular 

surged, rising by more than 7 percent annually. 

The trend toward higher overall food consumption and increased diversification of diets 

is driven by population growth, higher income levels, and growth of the middle class. 

Brazil is the world’s fifth most populous country, with over 203 million people; with 

annual population growth of about 1 percent over the past decade, it is adding nearly 

2 million new residents each year.82 In 2010, average per capita gross national income 

(GNI) in Brazil was $10,511, an increase of 26 percent over the level in 2000, and 

39 percent greater than the 1990 average GNI per capita, in real terms.83

While Brazil maintains one of the most unequal income distributions in the world, recent 

economic stability and prosperity have promoted the growth of the middle class. Over the 

past five years, an estimated 30 million people moved from the lower class to the middle 

class,84 a large-scale transition that has altered consumption patterns.85 In general, higher 

incomes have enabled Brazilians to shift from staple foods to a more diversified diet 

throughout the country. 86 Rising incomes have also led to a higher percentage of 

Brazilian households owning refrigerators (over 91 percent in 2007) and microwaves 

(32 percent of households in 2007). This has led to steadily increasing demand for 

processed and ready-to-eat foods. 87 In addition, as incomes continue to rise, the 

proportion of an average Brazilian family’s total food expenditure on products consumed 

outside the home has continued to grow; it reached nearly one-third of total food 

expenditures in 2008/09, up from one-quarter in 2002/03.88 The Brazilian population is 

young, with 25 percent under 14 years old, compared with 15 percent in Organisation for 

 81 Government official, interview by USITC staff, Brasilia, Brazil, August 24, 2011; industry 

representative, interview by USITC staff, São Paulo, Brazil, August 22, 2011. 82 CIA, The World Factbook: Brazil, updated July 5, 2011. 83 World Bank, Data: Brazil (accessed May 9, 2011). 

84 The middle class is defined in Brazil as families with monthly income ranging from $600 to $2,600. 

Valdes, Lopes, and Lopes, “Brazil’s Changing Food Demand Challenges the Farm Sector,” n.d., 2. 85 USDA, FAS, Brazil: Poultry and Products; Semi-Annual, February 3, 2011, 2. 86 A recent study found that a 10 percent increase in household income in Brazil would lead to a 

7 percent increase in meat expenditures, while an equivalent income rise in the United States would increase 

meat expenditures by only 1 percent. USDA, ERS, Convergence in Global Food Demand and Delivery, 

March 2008, 3. 87 Agriculture and Agrifood Canada, “The Brazilian Consumer,” August 2009, 4. 88 Average monthly food expenditures for a Brazilian family in 2008/09 amounted to R$421.72 

($212.20), of which R$290.39 ($146.12) was spent on food consumed at home, and R$131.33 ($66.08) on 

food consumed outside the home. IBGE, Consumer Expenditure Survey, 2010, 7–8. 
2-15 

Economic Co-operation and Development (OECD) countries. The youth of Brazil’s 

population will ensure continued growth of fast food restaurant chains and the products 

they sell, such as chicken, hamburgers, and potato products.89

In addition to economic growth, one factor that has contributed to rising income levels 

and consumption, especially in the Northeast, is targeted government programs.90 The 

conditional cash transfer 91 arm of the “Zero Hunger” program, known as the Bolsa 

Família, supplies food to 37 million children while they are at school and provides a 

monthly sum to poor families who keep their children in school and vaccinated. 

According to the World Bank, Bolsa Família helped raise almost 20 million Brazilians 

out of poverty between 2003 and 2009.92 

Agricultural Trade 

Brazil was the world’s third-largest exporter of agricultural products by value during 

2006–10, trailing only the EU-27 and the United States, and accounted for 9 percent of 

agricultural exports worldwide during that period. 93 In 2010, Brazilian agricultural 

exports represented 3 percent of Brazil’s GDP (compared with 1 percent for the United 

States). Agricultural exports represented a large and steadily increasing portion of total 

Brazilian exports, rising from 27 percent in 2006 to 32 percent in 2011. Brazil’s stature as 

a major exporter of agricultural products contrasted with its position as a global exporter 

in general, where Brazil ranked 16th in the world and trailed such countries as 

Switzerland and Australia.94

Brazil was the world’s 17th-largest importer of agricultural products during 2006–11. 

Between 2006 and 2011, Brazilian agricultural imports expanded at an annual average 

rate of 22 percent, reaching a record $11.0 billion in 2011 (table 2.3). Agricultural 

imports represented a consistently small portion of total Brazilian imports during 2006–

11 (between 4 and 5 percent). In addition, the increase in Brazilian agricultural imports, 

although larger in percentage terms than Brazil’s total exports, was small in absolute 

terms. 

 89 Economist, Brazil: Consumer Goods and Retail Report, February 8, 2011, 6. 90 One industry source reported that consumption of poultry in the Northeast was rising by as much as 

14 percent annually due to the significant government resources being dedicated to social development. 

Industry representative, interview by USITC staff, São Paulo, Brazil, August 22, 2011. 91 The cash provided through these types of programs is conditional because the recipients must fulfill a 

social condition (for example, keeping a child enrolled in school and vaccinated) in order to receive the cash. 

The intent is to provide benefits to the recipient that are both short term (cash) and long term (increased 

human capital). FAO, http://www.fao.org./DOCREP/005/AC829E/ac829e00.htm (accessed February 14, 

2012). 92 The World Bank, “Lifting Families Out of Poverty in Brazil” (accessed October 18, 2011). 93 By comparison, the EU-27 and the United States each accounted for 17 percent. 94 For all products, Brazil exported $198 billion in 2008, $153 billion in 2009, $202 billion in 2010, and 

$256 billion in 2011. GTIS, Global Trade Atlas database (accessed February 8, 2012). 
2-16 

TABLE 2.3 Brazil and the United States: Agricultural trade balance, 2006–11 

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

 Million $ Percent

Brazil 

 Exports 36,564 44,584 58,060 54,643 63,578 81,652 17

 Imports 4,140 5,617 7,547 6,554 8,105 11,001 22

 Balance 32,424 38,967 50,513 48,089 55,473 70,652 17

United States 

 Exports 76,090 95,737 121,400 103,710 122,463 146,321 14

 Imports 71,043 77,571 85,754 77,106 86,151 102,695 8

 Balance 5,047 18,166 35,646 26,604 36,312 43,626 54

Source: GTIS, Global Trade Atlas database (accessed February 16, 2012). 

During 2006–11, Brazil’s trade surplus in agricultural products more than doubled, 

reaching $70.7 billion. Much of this growth occurred between 2007 and 2008 and 

between 2010 and 2011, mostly reflecting significantly higher global commodity prices. 

Brazil had a larger trade surplus in agricultural products than the United States every year 

during 2006–11, but the gap narrowed as the U.S. surplus increased at a faster annual 

rate. 

Exports 

Exports by Product 

Between 2006 and 2011, Brazilian agricultural exports to the world grew 123 percent, 

increasing from $36.6 billion in 2006 to $81.7 billion in 2011. Brazilian global 

agricultural exports are concentrated in a few major commodities (figure 2.3). During 

2006–11, exports of soybeans, soybean meal and oil, sugar, and coffee represented more 

than 50 percent of Brazilian global agricultural exports, with poultry and beef accounting 

for an additional 19 percent. Tobacco products, corn, and fruit juice are also important 

Brazilian exports (table 2.4). 

Soybeans 

Between 2006 and 2010, Brazil was the world’s second-largest soybean-exporting 

country, accounting for about one-third of global exports.95 From 2006 to 2011, the value 

of Brazilian soybean exports grew 24 percent annually. While exports by volume 

increased about 6 percent annually during 2006–11, most of the growth in value can be 

attributed to a sharp increase in global soybean prices—especially between 2006 and 

2008, when prices almost doubled, and again between 2010 and 2011.96 By far the most 

important market for Brazilian soybeans is China, which accounted for half of Brazilian 

 95 The United States was the world’s leading soybean-exporting country, accounting for almost half of 

global exports during 2006–10. GTIS, Global Trade Atlas database (accessed October 12, 2011). 96 The unit price for Brazilian soybean exports increased from $226/mt in 2006 to $447/mt in 2008. 

GTIS, Global Trade Atlas database (accessed October 12, 2011). 
FIGURE 2.3 Brazil’s agricultural exports are concentrated in a few major products, 2011 (million $) 

Source: Compiled from USITC staff using data from GTIS, Global Trade Atlas database (accessed February 13, 2012). 

2-17 
2-18 

TABLE 2.4 Brazil: Agricultural exports by product group, 2006–11 

 2006 2007 2008 2009 2010 2011 

Annual average

change 2006–11

 Million $ Percent

 Animal products 

Live animals 89 285 418 471 697 492 41

Beef 3,890 4,354 5,081 3,890 4,564 5,077 5

Pork 1,022 1,209 1,448 1,204 1,321 1,416 7

Poultry 3,472 5,019 6,921 5,700 6,691 8,073 18

Dairy 139 274 510 148 132 98 –7

Eggs 30 53 95 86 115 110 30

Meats, processed 71 105 152 142 151 161 18

 Grains 

Wheat 64 30 204 63 227 699 61

Rice 60 53 312 268 163 613 59

Corn 482 1,919 1,405 1,302 2,216 2,716 41

 Oilseeds and products 

Soybeans 5,663 6,709 10,952 11,424 11,043 16,327 24

Soybean oil 1,229 1,720 2,671 1,234 1,352 2,129 12

Soybean meal 2,420 2,959 4,364 4,593 4,719 5,698 19

Oils, miscellaneous 157 200 315 227 296 450 24

 Horticultural products 

Vegetables, fresh 4 20 6 4 4 7 13

Vegetables, processed 30 58 46 58 43 65 17

Nuts 247 294 289 304 307 345 7

Fruit, fresh 472 643 724 559 610 633 6

Fruit, processed 52 71 85 65 49 50 –1

Fruit juice 1,570 2,374 2,152 1,752 1,925 2,566 10

 Beverages 

Coffee 2,953 3,405 4,168 3,791 5,204 8,026 22

Alcoholic beverages 60 63 79 82 88 100 11

Nonalcoholic beverages 14 16 21 16 16 13 –1

 Sugar, sweeteners, confectionery 

Sugar 6,167 5,101 5,483 8,378 12,762 14,942 19

Other sweeteners 204 205 256 256 248 283 7

Cocoa 362 365 401 352 419 421 3

 Processed foods 

Processed food, miscellaneous 814 1,060 1,383 1,092 1,301 1,330 10

Grains, milled 36 52 60 57 51 72 15

Animal feeds 168 230 319 285 317 289 11

 Nonfood products 

Cotton 343 511 701 690 822 1,591 36

Wool 9 10 10 16 20 23 22

Ethanol 1,605 1,478 2,390 1,338 1,014 1,492 –1

Hides 3 2 3 2 7 2 –11

Tobacco products 1,752 2,262 2,752 3,046 2,762 2,935 11

 Other 

All other 913 1,475 1,885 1,745 1,922 2,409 21

 Total 36,564 44,584 58,060 54,643 63,578 81,652 17

Source: GTIS, Global Trade Atlas database (accessed February 7, 2012). 
2-19 

soybean exports in 2006–11.97 The EU-27 is the second largest market for Brazilian 

soybeans, accounting for about one-third of sales during 2006–11. Other important 

markets for Brazilian soybeans are mostly in Asia, including Thailand, Taiwan, Japan, 

and Korea. Further information on Brazil’s trade and competitiveness in soybeans and 

soybean products is provided in chapter 6. 

Sugar and Ethanol 

Sugar was Brazil’s second-largest agricultural export during 2006–11, accounting for 

almost 16 percent of all Brazilian agricultural exports.98 Brazil is the world’s lowest-cost 

producer and by far its largest exporter of sugar, accounting for about half of global 

exports in 2010. Between 2006 and 2011, Brazilian sugar exports grew on average 

19 percent by value and 6 percent by volume annually. This expansion reflected strong 

global demand for sugar and record high global prices during 2009–11 that resulted from 

supply disruptions in other major producing countries, particularly in Asia. Sugar exports 

were highly diversified, with Brazil supplying over 100 countries on all continents. 

Russia and India were the most important export destinations, together accounting for 

more than 20 percent in 2011. 

Sugar cane can be used to produce either sugar or ethanol. Brazil was the second-largest 

ethanol producer in the world behind the United States in 2011, with Brazil and the 

United States together producing 88 percent of the global supply. 99 The top export 

markets for Brazilian ethanol were the EU-27, Korea, the United States, and Japan 

(together representing 72 percent of Brazilian exports). Because ethanol is derived from 

sugar cane in Brazil, the balance between the global prices of sugar and ethanol 

determines how much sugar is available for ethanol production. In recent years, as global 

sugar prices have surged ahead of global ethanol prices, the sugar cane available for 

ethanol production in Brazil has declined. Between 2006 and 2011, Brazilian sugar 

exports more than doubled by value; correspondingly, ethanol exports declined by 

7 percent. 

Poultry 

Poultry was Brazil’s third-largest agricultural export during 2006–11, accounting for 

almost 11 percent of all agricultural exports. Brazil is the world’s leading poultryexporting country. Between 2006 and 2011, the value and volume of Brazilian poultry 

exports grew by 18 percent and 6 percent, respectively, while its share of the global 

market remained fairly stable at about 40 percent. Brazil’s leading markets include 

several Middle Eastern countries—e.g., Saudi Arabia and the United Arab Emirates 

(UAE)—where Brazil supplies mainly whole birds and halal-certified poultry products 

that the United States typically does not export.100 Further information on Brazil’s poultry 

trade and competitiveness is provided in chapter 8. 

 97 In 2010, China accounted for almost 60 percent of global soybean imports. GTIS, Global Trade Atlas 

database (accessed October 12, 2011). 98 GTIS, Global Trade Atlas database (accessed February 8, 2012). 99 Renewable Fuels Association, “World Fuel Ethanol Production,” (accessed October 19, 2011). 100 Halal poultry is produced in accordance with Islamic law. To be certified as halal, poultry imports 

must comply with the unique requirements of each Islamic country. For further details, see chapter 8. 
2-20 

Coffee 

Coffee is one of Brazil’s trademark products. Brazil is the world’s largest coffee 

producer, and coffee was Brazil’s fourth-leading agricultural export during 2006–11, 

accounting for 8 percent of all agricultural exports.101 Brazil is by far the world’s largest 

exporter of coffee, accounting for about 30 percent of global exports during this period. 

Between 2006 and 2011, the value of Brazilian coffee exports grew each year, averaging 

about 22 percent growth annually; this figure, however, was highly volatile, reflecting 

unstable world coffee prices during the period. Improved export logistics and 

transportation methods, rising foreign investment, and initiatives by the Brazilian Coffee 

Association to improve roasting and processing bolstered production and demand both 

domestically and in export markets.102 In 2011, close to one-half of Brazilian coffee 

exports were sent to the EU-27 and one-quarter to the United States. 

Beef 

Beef accounted for 8 percent of Brazilian agricultural exports between 2006 and 2011. In 

2007, Brazil overtook Australia to become the world’s largest beef-exporting country, 

although it dropped to third behind the United States and Australia in 2011. In 2010, 

Brazil’s beef exports of $4.6 billion accounted for 19 percent of the value of global beef 

trade. Between 2006 and 2011, the EU-27 and Russia were consistently the top markets 

for Brazilian beef; however, as export volumes fell, their share dropped from about onehalf in 2006 and 2007 to about 32 percent in 2011. Since 2006, several Middle Eastern 

markets have developed a demand for Brazilian beef, in particular Iran; in 2010 Iran 

overtook the EU-27 to become Brazil’s second leading market, with an 18 percent share 

of total Brazilian beef exports. Further information on Brazil’s beef trade and 

competitiveness is provided in chapter 9. 

Corn 

Brazil is the world’s third-largest exporter of corn, behind the United States and 

Argentina. During 2006–11, the value of Brazilian corn exports rose from $482 million to 

$2.7 billion, reflecting increases in both the global price of corn and the volume of 

exports. Brazilian corn exports are dispersed among a fairly large number of recipient 

countries, with the EU-27, the largest importer, accounting for 10 percent in 2011. Other 

important markets for Brazilian corn in 2010 were Iran, Taiwan, Japan, Algeria, 

Morocco, and Malaysia. Further information on Brazil’s corn trade and competitiveness 

is provided in chapter 7. 

Tobacco 

Brazil is a major global exporter of tobacco products, primarily unmanufactured (raw) 

tobacco. In 2010, Brazil was by far the leading global exporter of tobacco, accounting for 

almost 30 percent of global exports, with the United States, the second leading exporter, 

at 13 percent. Between 2006 and 2011, 42 percent of Brazilian raw tobacco exports were 

sent for manufacturing in the EU-27, a leading global producer and exporter of cigarettes. 

Brazil is also the largest supplier to the U.S. market, accounting for almost 40 percent of 

 101 GTIS, Global Trade Atlas database (accessed February 8, 2012). 102 Commodity Online, “Barclays: Brazil Coffee Exports May Grow,” June 30, 2011. 
2-21 

total U.S. raw tobacco imports. China and Russia are major importers of Brazilian 

tobacco as well. 

Exports to Major Trading Partners 

Overall, Brazilian agricultural exports are spread out among a large number of 

destination markets. During 2006–11, the EU-27 was Brazil’s largest agricultural export 

market, accounting for 29 percent of the total (table 2.5).103 Although the EU-27’s share 

declined each year after 2007, in 2011 it remained Brazil’s largest export market. In 

2011, China (18 percent), the United States (6 percent) and Russia (5 percent) were the 

next largest markets by value share for Brazilian agricultural exports, but China’s share 

almost doubled from 2006 to 2011, while the United States’ share remained at between 

5 and 8 percent. 104 Other important markets included Japan, Venezuela, and several 

markets in the Middle East (Iran, Saudi Arabia, and Egypt). Brazilian agricultural exports 

to Argentina, Paraguay, and Uruguay, which are fellow current member countries in the 

Mercado Comum do Sul (Mercosul), accounted for less than 2 percent of the total in 

2011. Brazilian exports to Brazil’s three Mercosul partners combined were roughly on a 

par with those to the UAE or Korea, but increased slightly faster from 2006 to 2011 

(18 percent annually) than Brazilian agricultural exports overall (17 percent). 

TABLE 2.5 Brazil: Agricultural exports to major trading partners, 2006–11 

 2006 2007 2008 2009 2010 2011 

Annual average 

change 2006–11

Million $ Percent

EU-27 11,856 15,916 18,651 15,600 15,765 19,203 10

China 2,802 3,576 6,688 7,423 9,332 14,614 39

United States 3,063 2,931 3,336 2,560 2,957 4,517 8

Russia 3,125 3,362 4,156 2,769 4,039 4,016 5

Japan 1,161 1,461 2,128 1,596 2,108 3,227 23

Saudi Arabia 817 954 1,393 1,479 1,926 2,391 24

Venezuela 519 948 2,219 1,444 2,006 2,193 33

Iran 1,374 1,546 910 1,091 2,061 2,120 9

Egypt 794 643 728 734 1,302 1,879 19

Hong Kong 552 925 1,367 1,526 1,302 1,716 25

All other 10,502 12,322 16,484 18,422 20,779 25,775 20

 Total 36,564 44,584 58,060 54,643 63,578 81,652 17

 Mercosul members 640 817 1,041 932 1,199 1,451 18

Source: GTIS, Global Trade Atlas database (accessed February 7, 2012). 

Note: Current Mercosul members are Argentina, Paraguay, and Uruguay.

 103 Brazil is also the EU-27’s largest source of agricultural product imports. GTIS, Global Trade Atlas 

database (accessed February 8, 2012). 104 GTIS, Global Trade Atlas database (accessed February 8, 2012). 
2-22 

Imports 

Imports by Product 

Between 2006 and 2011, Brazilian agricultural imports increased from $4.1 billion to 

$11.0 billion, a rate of about 22 percent annually (table 2.6). Brazilian agricultural 

imports are fairly concentrated in a few major products in which domestic supply falls 

short of domestic demand. The main agricultural imports include wheat and milled 

grains, miscellaneous oils, ethanol, processed vegetables, and fresh fruit. Combined, 

these products accounted for about one-half of all agricultural imports during 2006–11.105

Grains 

Brazil is not a major wheat-producing country and, as a result, imports about half of its 

domestic wheat consumption annually.106 In 2010, Brazil was the world’s third-largest 

wheat-importing country, behind Egypt and Japan.107 Unmilled wheat was by far Brazil’s 

largest agricultural import category, accounting for almost 21 percent of total Brazilian 

agricultural imports during 2006–11. In 2011, Mercosul countries supplied 98 percent of 

Brazil’s wheat imports, with Argentina contributing about 80 percent. Either the United 

States or Canada supplied almost all of the remaining 2 percent. In exporting wheat to 

Brazil, Mercosul countries benefit from proximity, duty-free access, and an exemption 

from the merchant marine tax.108

After wheat, Brazil’s largest agricultural product import category is milled grains, which 

accounted for about 9 percent of all agricultural imports during 2006–11. 109 These 

imports consisted mostly of malt which is used as an ingredient in Brazil’s brewing 

industry, and wheat flour used for making bread and other baked goods.110 In 2011, 

Mercosul countries supplied about 80 percent of Brazil’s milled grain imports, shared 

fairly evenly between Argentina and Uruguay. The EU-27 is also an important global 

source of malted barley used for brewing.111

Miscellaneous Oils 

The third-largest agricultural product import category is miscellaneous oils, which 

accounted for just over 8 percent of Brazil’s agricultural imports during 2006–11.112

Imports of this product group consisted mostly of olive oil, coconut oil, and palm oil used 

for cooking and for manufacturing cosmetics and toiletries. The EU-27 (mostly Portugal 

and Spain) supplied most of Brazilian olive oil imports, while Indonesia and Malaysia 

were by far the leading suppliers of coconut and palm oil. 

 105 Imports of miscellaneous, not otherwise classified agricultural products accounted for 11 percent of 

Brazilian imports during 2006–11. GTIS, Global Trade Atlas database (accessed February 8, 2012). 106 USDA, FAS, PSD Online (accessed February 4, 2012). 107 GTIS, Global Trade Atlas database (accessed February 8, 2012). 108 For more detailed information on the merchant marine tax, see chapter 3. 109 Milled grains are included in chapter 11 of the HS. 110 Malt and wheat flour are covered under the global Harmonized Schedule (HS) tariff codes 1107 and 

1101, respectively. 111 Boland, Brester, and Taylor, “Barley Profile,” August 2011. 112 Miscellaneous oils are included in HS 1508–1521. 
2-23 

TABLE 2.6 Brazil: Agricultural imports by product group, 2006–11 

2006 2007 2008 2009 2010 2011 

Annual average

change 2006–11

 Million $ Percent

Animal products 

Live animals 4 11 32 26 13 16 35

Beef 67 98 127 125 169 243 29

Pork 2 2 3 4 6 9 36

Poultry 1 1 2 1 3 7 63

Dairy 172 179 249 289 387 678 32

Eggs 16 22 20 11 21 18 2

Meats, processed 0 0 1 1 1 2 32

Grains 

Wheat 989 1,392 1,874 1,209 1,528 1,832 13

Rice 175 237 226 272 377 273 9

Corn 81 133 150 162 76 141 12

Oilseeds and products 

Soybeans 10 29 40 38 44 16 11

Soybean oil 12 43 29 21 14 0 -53

Soybean meal 25 21 38 15 13 8 -20

Oils, miscellaneous 277 409 691 555 705 1,015 30

Horticulture 

Vegetables, fresh 116 141 167 169 373 326 23

Vegetables, processed 214 306 567 408 649 692 26

Nuts 59 66 88 70 96 167 23

Fruit, fresh 206 240 281 322 421 550 22

Fruit, processed 54 65 76 68 92 120 17

Fruit juice 8 11 15 17 28 28 28

Beverages 

Coffee 1 2 8 14 22 41 96

Beverages, alcoholic 229 276 286 302 387 489 16

Beverages, nonalcoholic 15 20 32 38 48 85 41

Sugar, sweeteners, and confectionery 

Sugar 0 0 0 0 0 0 34

Other sweeteners 30 40 57 44 61 79 22

Cocoa 130 212 216 274 278 259 15

Processed food 

Processed food, misc. 234 219 290 312 370 480 15

Grains, milled 269 487 847 770 723 872 27

Animal feeds 104 141 167 149 179 213 15

Nonfood products 

Cotton 101 127 56 20 70 396 31

Wool 2 2 2 1 1 2 3

Ethanol 0 2 1 2 39 841 408

Hides 7 7 7 5 7 9 5

Tobacco products 30 42 49 67 74 38 5

Other 

All other 501 631 854 771 828 1,051 16

 Total 4,140 5,617 7,547 6,554 8,105 11,001 22

Source: GTIS, Global Trade Atlas database (accessed February 7, 2012). 

 
2-24 

Ethanol 

Ethanol ranked fourth, in terms of value, among Brazilian imports of agricultural 

products in 2011 (table 2.6).113 Brazilian ethanol imports were nil or very small during 

2006–10, but increased dramatically in 2011 to $841 million. The United States was by 

far the leading exporter, accounting for 94 percent of the total in 2011. The bulk of 

Brazilian imports of ethanol, 91 percent of the value in 2011, was accounted for by 

denatured ethanol, most of which is used for fuel. Brazil is the second-largest global fuel 

ethanol market and historically has been self-sufficient in domestic supply. However, a 

number of factors contributed to the rise in imports in 2011. First, adverse financial and 

weather conditions led to a decline in the production of sugar cane, the feedstock used for 

ethanol in Brazil. Second, developments in the global sugar market resulted in high sugar 

prices and caused Brazilian producers to shift a larger share of their production from 

ethanol to sugar for export markets.114 Third, developments in the U.S. ethanol market, 

driven largely by mandates linked to environmental requirements, created price 

premiums for Brazilian sugar cane ethanol that attracted Brazilian exports to the United 

States. Brazil then imported U.S. corn ethanol to backfill supply imbalances. 

Horticultural Products 

Between 2006 and 2011, Brazil more than tripled its imports of processed vegetables, 

which ranked as its fifth-largest agricultural product import category in 2011.115 Among 

the leading processed vegetables imported by Brazil were frozen potatoes (from 

Argentina and the EU-27), preserved olives (also from Argentina and the EU-27), and 

dried beans (from Argentina and Canada). Brazil also imported a variety of fresh fruits, 

including fresh apples, grapes, and various stone fruit (apricots, cherries, plums, and 

peaches), with the majority sourced from Argentina. 

Imports from Major Trading Partners 

During 2006–11, Brazil’s top five import sources provided 80 percent of Brazilian 

imports, with Mercosul partner Argentina, the largest agricultural import source, 

supplying just under 40 percent of the total; the EU-27 second with 16 percent, and the 

United States third with 15 percent (table 2.7). When Uruguay (the fourth-largest) and 

Paraguay (the fifth-largest import source) are included, Mercosul accounted for about 

one-half of Brazil’s agricultural imports.116 During this period, Argentina was a major 

supplier of wheat and milled grains, while Paraguay supplied wheat, rice, and corn, and 

Uruguay supplied wheat, rice, and milled grains. During 2006–11, the EU-27 and the 

United States supplied a wide range of products, led by alcoholic beverages and 

miscellaneous oils for the EU-27 and wheat and miscellaneous processed foods for the 

United States. 

 113 Data are for HS subheading 2207, which includes ethanol for beverage, fuel, and industrial use. 114 Most Brazilian ethanol production occurs at facilities that can produce both sugar and ethanol. 115 Processed vegetables include products in HS 0710–0714 and HS 2001–05. 116 GTIS, Global Trade Atlas database (accessed February 8, 2012). 
2-25 

TABLE 2.7 Brazil: Agricultural imports from major trading partners, 2006–11 

 2006 2007 2008 2009 2010 2011 

Annual average 

change 2006–11

 Million $ Percent

Argentina 1,856 2,468 3,067 2,373 2,911 4,004 17

EU-27 767 921 1,220 1,183 1,405 1,769 18

United States 283 407 688 382 572 1,601 41

Uruguay 310 403 491 753 919 957 25

Paraguay 219 323 477 461 429 453 16

China 88 111 273 211 384 410 36

Indonesia 129 190 264 256 332 410 26

Chile 132 169 195 226 314 348 21

Malaysia 46 90 118 87 118 199 34

Côte ď Ivoire 34 59 92 74 46 87 21

All other 276 476 662 547 674 761 22

 Total 4,140 5,617 7,547 6,554 8,105 11,001 22

 Mercosul members 2,385 3,194 4,035 3,587 4,260 5,415 18

Source: GTIS, Global Trade Atlas database (accessed February 7, 2012). 

Note: Current Mercosul members are Argentina, Paraguay, and Uruguay.

Brazil’s Participation in Preferential Trade Arrangements 

Mercosul 

Brazil’s most significant trade agreement is Mercosul, which entered into force in 1991. 

Mercosul is a customs union joining Brazil, Argentina, Paraguay, and Uruguay.117 As a 

customs union, Mercosul comprises both a free trade area (FTA) among its members and 

a common external tariff (CET) that is applied to imports from nonmembers. The 

agreement eliminated most tariffs between members and created committees to resolve 

nontariff barriers and other technical issues. Mercosul also seeks regional integration in 

promoting common approaches to agricultural policy, labor issues, and intellectual 

property among the four countries.118 Nevertheless, the trade priorities of the members 

often differ, primarily because of the disparity in the size of the member economies. 

Duty-free status for Mercosul members provides an important incentive for intraMercosul agricultural trade. Mercosul countries are important agricultural trading 

partners for Brazil, accounting for approximately 7 percent of total Brazilian agricultural 

trade (imports plus exports) in 2011. For many agricultural products, the CET ranges 

between 10 and 20 percent.119 Therefore, Brazil has a considerable advantage over the 

United States in exporting agricultural products to Argentina, Paraguay, and Uruguay, 

and U.S. products are put at a cost disadvantage compared to these countries in exporting 

products to Brazil. For example, given duty-free access within Mercosul and a common 

 117 Bolivia, Chile, Colombia, Ecuador, Peru, and Venezuela are associate members of Mercosul and 

receive tariff reductions, but they do not participate in the CET. 118 Laird, “Mercosur: Objectives and Achievements,” May 23, 2011, 6. 119 However, for some products, such as dairy goods, the rate is close to 30 percent. 
2-26 

external tariff of 10 percent, Argentina, a major wheat producer, gains a significant 

advantage over the United States in exporting wheat to Brazil. 

Other Preferential Trade Arrangements 

Brazil’s government has become increasingly open to trade liberalization since its 

economic stabilization in the early 1990s. However, in order to maintain the common 

external tariff, under the Mercosul agreement its member states cannot sign FTAs 

bilaterally with nonmember states. 120 As a result, only Mercosul’s Common Market 

Council has the power to negotiate and sign agreements on behalf of the trading bloc.121

Mercosul signed a 1998 framework agreement with the Andean Community (Bolivia, 

Ecuador, Colombia, and Peru) to begin negotiations toward creating a free trade 

agreement between the two customs unions. The Mercosul-Andean Community 

agreement was signed as a cooperation agreement under which Andean countries later 

negotiated bilateral tariff reductions between countries in the two trade blocs.122 Mercosul 

has since signed a series of economic complementation agreements (ECAs) with 

members of the Andean Community, widening market access for Mercosul agricultural 

exports. As a result of the various ECAs, exports from Brazil and the other Mercosul 

members have a tariff advantage in the Andean Community markets, which has undercut 

U.S. agricultural exporters’ price competitiveness there. For example, Mercosul corn 

exports to Colombia receive a 60 percent duty reduction. This is a primary driver behind 

the drop in the share of U.S. corn in the Colombian import market, from 80 percent in 

2008 to 18 percent in 2010. 123 However, the entry into force in 2012 of the U.S.-

Colombia Free Trade Agreement is expected to improve the competitiveness of U.S. corn 

by providing greater duty-free access through the phaseout of duties over the next 12 

years.124

Mercosul has signed FTAs or preferential trade agreements (PTAs) with other 

non-member countries, but these agreements generally only provide preferential tariff 

rates for a few products (table 2.8). Because of the paucity of agricultural products 

covered, the small preferences provided, and the relatively low per capita income in these 

markets, the impacts of these agreements on Brazilian agricultural exports has been 

small. Mercosul has signed trade agreements with the Southern African Customs Union 

(SACU) and Egypt, but these have not yet entered into force. 

 120 Brazilian Ministério das Relações Exteriores, “Treaty Establishing a Common Market, chapter 1,” 

March 26, 1991. 121 When the council signs a new trade agreement, each member state must individually ratify the 

agreement for it to enter into force. 122 The Andean Community countries and Chile are also associate members of Mercosul. Venezuela 

was previously an associate member, but in 2006 applied for full membership and was accepted. However, at 

the time of this report’s publication, full membership for Venezuela was still pending ratification by the 

Paraguayan congress. While the ECA agreements provide tariff preferences, associate member countries are 

not given duty-free access to the Mercosul common market and are not required to impose the common 

external tariff as a result of their associate member status. USDA, FAS, “U.S.-Colombia Trade Promotion 

Agreement Benefits for Agriculture,” May 2011, 1. 123 USDA, FAS, Colombia: Grain and Feed Annual, March 15, 2011, 1. 124 The White House, “U.S.-Colombia Trade Promotion Agreement,” April 6, 2011. 
2-27 

TABLE 2.8 Overview of selected Mercosul trade agreements, completed and in negotiation 

Participants Type of agreement Effective date Comments 

India Preferential trade 

agreement (fixed 

preference 

agreement) 

Signed in 2003-04; entered 

into force June 1, 2009. 

First trade agreement to enter into force between 

Mercosul and an extra-regional country. Limited impact 

on bilateral trade because preferences are small (10–

20 percent tariff reductions) and cover only 450 products 

for Mercosul exports to India. 

Israel Free trade 

agreement (FTA) 

Negotiations started in 

2005; signed in December 

2007; entered into force 

March–April 2011. 

The agreement covers 90 percent of bilateral trade, 

including many agricultural products, with a schedule of 

progressive tariff reductions in four phases: immediate, 4 

years, 8 years, and 10 years. 

Morocco Framework 

agreement on trade 

Negotiations concluded 

November 2004; entered 

into force April 2010. 

Text of the agreement is not publicly available at this 

time. Limited impact on bilateral trade because small tariff 

reductions on major Moroccan imports from Brazil (e.g., 

sugar). 

Venezuela Associate member; 

has applied for full 

membership 

Membership petition 

accepted in 2006, but it has 

not been ratified by all four 

member legislatures. 

Membership has been approved by the Argentinian, 

Brazilian, and Uruguayan legislatures. Venezuela will 

receive full membership status when the accession is 

ratified by the Paraguayan legislature. 

Bolivia, 

Colombia, 

Ecuador, 

Peru, and 

Chile 

Various economic 

complementation 

agreements (ECA) 

The first ECA that entered 

into force was signed in 

1996, and the most recent 

became effective in April 

2005. 

All five countries are associate members of Mercosul, but 

both Bolivia and Ecuador are in talks to become full 

members. Certain ECAs were signed bilaterally with 

Mercosul, while others were signed with multiple 

countries participating, such as certain Mercosur-Andean 

Community Agreements. The ECAs provide gradual tariff 

reductions for many sectors, including some agricultural 

products, and state the parties’ intent to sign an FTA. 

Southern 

African 

Customs 

Union (SACU) 

Fixed preferences 

agreement 

Negotiations concluded in 

April 2008 and the 

agreement was signed in 

April 2009; not yet entered 

into force. 

SACU consists of Botswana, Lesotho, Namibia, South 

Africa, and Swaziland. 

Cuba Partial 

complementation 

agreement 

Agreement signed in July 

2006. 

Text of the agreement is not publicly available at this 

time. Limited impact on bilateral trade because mostly 

nontariff factors drive agricultural trade between Brazil 

and Cuba (e.g., the availability of credit). 

Egypt FTA Concluded August 2010; not 

yet entered into force. 

Text of the agreement is not publicly available at this 

time. Limited impact on bilateral trade because small tariff 

reductions on major Egyptian imports from Brazil (e.g., 

sugar). 

European 

Union 

FTA Negotiations began in 1995. 

Suspended without an 

agreement in 2004. 

Negotiations were 

relaunched in May 2010. 

EU farm subsidies and uncertainty about the removal of 

agricultural nontariff barriers, as well as Brazil's 

reluctance to increase market access for sensitive 

manufacturing industries, have slowed negotiations. 

Sources: Government officials, interview by USITC staff, Brasilia, Brazil, August 25, 2011; Israeli Ministry of Industry, Trade, and 

Labor, “Free Trade Agreement between Mercosur and the State of Israel: Annex 2, List of Concessions Made by Israel”; 

Government of India, Ministry of Commerce, Preferential Trade Agreement between Mercosur and the Republic of India, March 19, 

2005; Sasman, "Sacu-Mercosur Pta Gets Cautionary Thumbs-up," November 1, 2011; Organization of American States, SICE 

Foreign Trade Information System Web site, http://www.sice.oas.org/agreements_e.asp. 

As the largest economy in Mercosul, Brazil has often held discussions with other 

countries and trading blocs regarding the formation of PTAs or FTAs. These include, 

among others, the EU-27, the Gulf Cooperation Council, and the Dominican Republic. 

Negotiations have generally stalled because counterparts are reluctant to provide 

additional market access for Brazil’s agricultural exports, while Brazil has hesitated to 

widen market access in sensitive manufacturing industries.125

 

 125 Government officials, interview by USITC staff, Brasilia, Brazil, August 25, 2011. 
2-28 

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2-31 

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 October 18, 2011). 
3-1 

CHAPTER 3 

Brazil’s Transportation Infrastructure and 

Government Policies 

Transportation infrastructure and government policies in Brazil are the two factors that 

most broadly affect Brazilian agricultural competitiveness. In terms of the three 

categories of factors discussed in chapter 1 used to measure competitiveness, poor 

transportation infrastructure impacts delivered cost and reliability of supply, while 

government policies impact all three, including product differentiation. Government 

policies have also driven infrastructure development; therefore, these two factors are 

discussed together in this chapter. Further analysis of other competitive factors that affect 

Brazil’s agriculture sector is presented in chapter 4 of the report. 

Inadequate transportation infrastructure is one of the primary factors undermining 

Brazil’s agricultural export competitiveness in third-country markets. The problem has 

been exacerbated by the shift of production growth to the Center-West region, which has 

considerably increased the distance between certain important production areas and 

export ports. The effect of government policies on Brazilian exporters’ competitiveness 

in third-country markets is less direct and in many ways more limited than that of 

transportation infrastructure. Nevertheless, such policies tend to have positive effects as 

they address structural inefficiencies and enable producers to lower delivered costs, 

differentiate products, and support production to ensure reliable supply. 

Transportation Infrastructure 

Overview 

Transportation infrastructure development increases the ability of industries to produce, 

move, store, and market goods and services competitively in both domestic and export 

markets. Improvements in transportation infrastructure will likely have the largest impact 

on Brazil’s ability to compete in foreign markets by significantly reducing Brazil’s 

comparatively high transportation costs and inefficiencies—constraints that undercut 

Brazil’s position as a global agricultural producer and reduce its competitiveness in world 

markets.1

 1

 In addition to transportation infrastructure, a number of other types of infrastructure affect the ability 

of Brazil’s agricultural producers to export competitively. The electricity sector, for instance, contributes to 

agricultural processing. Information and communications technology facilitates communication among 

buyers and sellers and reduces logistics costs. Financial services help mobilize funds for investment in 

productive capacity. Marketing infrastructure helps establish market prices for globally traded commodities 

like soybeans. Water and sanitation infrastructure is a critical input in the production of many goods and 

services and is crucial to maintaining a healthy workforce. These types of infrastructure will not be a focus of 

this chapter. 
3-2 

Despite being one of the world’s largest producers and exporters of agricultural goods, 

Brazil suffers from inadequate transportation infrastructure. Limited connectivity among 

transport modes, as well as inadequate railways and viable waterways to transport goods 

for export, contribute to an overreliance on more expensive road transport. Further, the 

vast agricultural production in Brazil’s cerrado region is far from the coastal ports, 

leading to long and costly transport routes for exports. High transportation costs erode 

many of the competitive cost advantages enjoyed by Brazilian agricultural producers. 

Estimates put logistics costs in Brazil at 29 percent of total costs, on average across all 

agricultural sectors, versus 5.5 percent in the United States.2

 Limited storage capacity for 

agricultural production further adds to the cost burden. 

To a large degree, the experiences of Brazilian agricultural producers contrast with those 

of their U.S. counterparts. In the United States, established, highly developed rail 

networks link agricultural producing areas to major trading hubs and to major waterways 

such as the Missouri and Mississippi rivers for export. U.S. farmers benefit from more 

efficient transport, and as a result, inland transportation costs in the United States are 

considerably lower than those in Brazil. The contrast is particularly striking for Mato 

Grosso, one of Brazil’s largest and most promising agricultural producing regions.3

 

The Brazilian government recognizes the need to improve its transportation 

infrastructure, and has undertaken initiatives, including privatization efforts, to increase 

both public and private investment in infrastructure projects. Through its National Plan 

for Transportation and Logistics (NPTL) and the Growth and Acceleration Program 

(PAC), in the coming years the government intends to invest significantly in 

infrastructure development to improve and expand railways, waterways, road networks, 

and ports. Although progress has generally been characterized as uneven thus far, 

improvements have occurred.4

Private investment will be instrumental to meeting the government’s infrastructure 

development objectives, and it is expected to represent a significant share of overall 

infrastructure investment. The government has privatized the operation of some public 

assets—notably ports and railways and, to a lesser extent, roadways—and this has 

stimulated increased private investment in these sectors, often with the help of loans 

provided by Brazil’s national development bank, BNDES. In addition, many of Brazil’s 

agricultural producers have invested directly in local road networks, storage and 

warehousing facilities, and port terminals to improve their logistics and supply chains and 

reduce transportation inefficiencies and costs. 

In the long term, investments in Brazil’s transportation infrastructure will have a lasting 

positive effect on the country’s agricultural competitiveness. But the impact will be 

complete only if these improvements can keep pace with the expected growth in 

agricultural production. In the short term, a variety of challenges—the need to coordinate 

policies and budgeting among different government units, allegations of mismanagement 

 2

 Logistics costs include not only transportation costs but also other costs, such as storage and materials 

handling. Government official, interview by USITC staff, Brasília, Brazil, August 24, 2011. 3

 Domestic transportation costs of soybeans harvested in Mato Grosso, for instance, account for 25–

30 percent of the soybeans’ total cost at the port, compared with only 8–10 percent for U.S. soybeans. 4

 Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 27–September 1, 

2011; industry representatives, interview by USITC staff, Rio de Janeiro, Brazil, September 2, 2011. 
3-3 

at agencies overseeing infrastructure projects, and Brazil’s immediate focus on upgrading 

infrastructure for the 2014 World Cup and the 2016 Olympics—will continue to hamper 

the government’s ability to act decisively to improve Brazil’s transportation 

infrastructure. 

Transportation Infrastructure Conditions in Brazil 

Brazil’s overall transportation infrastructure is generally considered inadequate, 

especially compared to other regions in the world. According to a World Economic 

Forum (WEF) survey that asked firms to rank countries’ competitiveness among a 

number of factors, Brazil ranked in the bottom half with respect to the quality of 

transportation infrastructure, including the quality of roads (118th out of 142 countries), 

railways (91st out of 122), and ports (130th out of 142), 5 well below other large 

agricultural producers such as the United States and China.6

 Similarly, the World Bank’s 

Logistics Performance Index (LPI) ranks the quality of Brazil’s infrastructure ahead of 

that of neighboring Argentina and Chile, yet significantly below that of the United States 

and China.7

Compared to countries of comparable geographic size, such as the United States, China, 

and Russia, Brazil relies more heavily on road transport. Road transport accounts for 

roughly 60 percent of cargo transported in Brazil, compared with 32 percent in the United 

States, 50 percent in China, and only 8 percent in Russia. In contrast, less expensive rail 

transport accounts for 25 percent of cargo transported in Brazil, compared with 

43 percent in the United States, 37 percent in China, and 81 percent in Russia.8

 Brazil’s 

historical underinvestment in railways and waterways contributes to its reliance on road 

transport. Brazil’s vast geography, long distances between remote inland agricultural 

producing areas and ports, and a lack of expansive rail networks or viable waterways 

often make alternative means of transport impractical. In addition, transportation 

infrastructure varies regionally within Brazil, which affects agricultural export routes 

(box 3.1). 

The transport of goods involving different modes of transport such as road and rail 

(intermodal transport) is limited in Brazil. A lack of interfaces between inland road 

networks and railways, and railways and ports, limits the use of more efficient intermodal 

transport to haul most of Brazil’s bulk agricultural goods.9

 With the exception of a few 

specialized and highly efficient private intermodal ocean terminals, such as Vale’s 

 5

 WEF, The Global Competitiveness Report 2011–2012, 412–415. 

6

 The United States ranked 20th in the quality of roads and rail infrastructure, and 23rd in the quality of 

port infrastructure. China ranked 54th in the quality of roads, 21st in the quality of rail infrastructure, and 

56th in the quality of port infrastructure. WEF, The Global Competitiveness Report 2011–12, 412–15. 7

 World Bank, Logistics Performance Index (LPI). The LPI assigns a weighted average score to each 

country rated based on the efficiency of the customs clearance process; the quality of trade and transportrelated infrastructure, including ports, railroads, roads, and information technology; the ease of arranging 

competitively priced shipments; the competence and quality of logistics services (e.g., transport operators or 

customs brokers); the ability to track and trace consignments; and the timeliness of shipments in reaching a 

destination within the scheduled or expected delivery time. 8

 Brazil Ministry of Transport, “Logistic Infrastructure Scenario in Brazil,” September 21, 2010. 9

 Estevadeordal et al., Bridging Integration Gaps, 2010, 11. 
3-4 

BOX 3.1 Overview of Agricultural Export Routes in Brazil __ 

The southern states of Paraná, São Paulo, and Rio Grande do Sul have traditionally accounted for the majority of 

Brazil’s agricultural production. These states are served by established road and rail networks and are close to domestic 

markets and ports for export. Even though agricultural production is now booming in the Center-West, this region still 

exports most of its agricultural goods via southern and southeastern ports rather than through the geographically closer 

river ports in the North because of the underdeveloped transportation infrastructure linking the North with the CenterWest.a

 For example, although soybean production in the Center-West has eclipsed that in the southern states, more 

than 80 percent of soybean exports are shipped through the south and southeastern ports of Vitória, Santos, 

Paranaguá, São Francisco do Sul, and Rio Grande.b Similarly, trucks transport over 70 percent of Brazil’s cotton exports 

over vast distances from inland growing areas to the ports of Santos and Paranaguá.c

 Longer distances to port and the 

reliance on road transport lead to transportation bottlenecks and high transportation costs.d

Government efforts, notably through Brazil’s Growth and Acceleration Program (PAC), have focused on developing 

viable road, rail, and waterways to help shift export routes, including those for soybeans, toward northern and 

northeastern ports to reduce transportation costs and relieve congestion at southern ports (figure 3.1). The use of 

northern ports for exporting soybeans and corn is becoming more common, but despite government efforts, its growth 

may be restricted in the future by a lack of port capacity. 

FIGURE 3.1 Soybean export routes are beginning to shift towards northern Brazil 

Source: USDA, AMS, Brazil Soybean Transportation, August 10, 2011, 1. 

_____________ a Industry representative, interview by USITC staff, Brasilia, Brazil, August 25, 2011. b USDA, AMS, Brazil Soybean Transportation, August 10, 2011, 2. c USDA, FAS, Cotton Transport and Handling Overview, March 25, 2008, 5. d USDA, FAS, Soybean Transport and Handling Overview, 2008, 5.
3-5 

terminal to export iron ore or Cargill’s terminal to export bulk agricultural products at the 

port of Santos, most ports lack intermodal transfer facilities other than those that transfer 

goods from trucks to ocean vessels.10 More often, freight transporters must access ports 

by narrow and congested roads, leading to transportation bottlenecks, delays, and higher 

costs. According to a World Bank study, avoidable logistics and transportation spending 

related to inefficient intermodal transport in Brazil add more than $1.2 billion per year to 

the cost of trade in goods.11 The study also found that increasing the use of rail in areas 

with existing rail services to transport goods could reduce domestic logistics and 

transportation costs by over $1.3 billion.12

Roads 

Although Brazil has the world’s fourth-largest road network in the world 

(1.8 million km),13 only 12 percent of its roads are paved.14 Moreover, this network is 

concentrated along southeastern population centers, far from the inland agricultural 

producing regions in the Center-West. Road conditions vary among federal, state, and 

municipal road networks. For instance, although 82 percent of Brazil’s federal road 

network is paved, federal roads account for only 5 percent of Brazil’s total road network. 

In contrast, the municipal roads that dot Brazil’s interior account for 80 percent of 

Brazil’s road network, but only 2 percent of these are paved.15 Furthermore, due to a lack 

of sustained investment in road maintenance, only 25 percent of Brazil’s overall road 

network has been rated in good or very good condition.16 Some farms have pooled 

resources to build feeder roads that connect farms to national road networks. For 

example, some farmers in Mato Grosso paid for 90 percent of the initial costs to build 

local feeder roads, and established a toll to offset the costs.17 In other cases, larger farms 

have built their own internal feeder roads to provide access to various locations on their 

farms.18

Brazil’s trucking industry is fragmented and highly competitive, as self-employed truck 

drivers reportedly account for over half of Brazil’s fleet of 1.8 million cargo vehicles.19

Self-employed truckers are largely unregulated, and fierce competition among them often 

 10 ILOS, Logistics Overview in Brazil 2008, 2; Estevadeordal et al., Bridging Integration Gaps, 2010, 

11. 11 World Bank, Brazil Multimodal Freight Transport, 1997, 1, 36. Although somewhat dated, the report 

identifies the costs associated with importing and exporting, including port handling, inland transport, 

warehousing, customs, and administrative costs, and compares these costs with potential cost savings based 

on policy reforms recommended in the study. Policy reforms were expected to improve port productivity and 

costs by reducing ship turnaround times, and trucking costs by reducing the waiting time to load and unload 

containers. 12 Estevadeordal et al., Bridging Integration Gaps, 2010, 11. 13 The United States has the largest road network (6.5 million km), followed by China (3.9 million km) 

and India (3.3 million km). CIA, World Factbook, December 1, 2011. 14 WEF, The Brazil Competitiveness Report 2009, 2009, 34. 15 Brazil Ministry of Transport, “Logistic Infrastructure Scenario in Brazil,” September 21, 2010. 16 Guasch et al., “Logistics, Transport, and Food Prices in LAC,” 2009, 18. A 2009 survey conducted 

by Brazil’s Confederation of National Transport (CNT), a trade union, found that the condition of 69 percent 

of all roads (both paved and unpaved) ranged from acceptable to inadequate, and that the condition of over 

half of even the paved roads in Brazil ranged from acceptable to very bad. USDA, AMS, Soybean 

Transportation Guide: Brazil 2009, 2010, 40. 17 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 18 Ibid. 

19 Industry representative, interview by USITC staff, Rio de Janeiro, Brazil, September 2, 2011; ILOS, 

Logistics Overview in Brazil 2008, 2008, 7. 
3-6 

drives down the price of trucking services below the total cost of freight hauled. 20

Although lower prices make road transport a more attractive and economical transport 

option from the point of view of the buyer, some self-employed truck drivers will cut 

corners to recover a portion of the total cost.21 Overall, this practice may contribute to 

vehicle overloading, excessive speed, overlong workdays, poor vehicle maintenance, and 

a decrease in the quality and safety of road transportation services.22

Trucking services and fleets are also unevenly distributed throughout Brazil, which can 

create transportation bottlenecks for agricultural producers at harvest time. For example, 

according to Brazil’s National Agency for Land Transportation (ANTT), a government 

regulatory body that oversees the country’s road and rail networks, although Mato Grosso 

is the largest soybean-producing state and the second-largest grain producing state in 

Brazil, only 3 percent of Brazil’s transport fleet is registered in the state.23 As a result, 

during peak harvest periods, trucking companies must send additional trucks to Mato 

Grosso from other parts of Brazil, which drives up transport costs. In addition, road 

congestion during peak harvest periods also raises transportation costs.24

Many poultry producers reportedly maintain their own cold-storage transportation fleet to 

transport poultry to ports for export, although port delays often lead to spoilage and 

waste.25 Other farmers have small trucking fleets to transport produce locally or between 

farms; several, however, have shed these assets because of a low or negative return on 

investment, often owing to competition from lower-cost, largely unregulated independent 

truck drivers.26 Other producers may use both internal trucking fleets and third-party 

logistics providers to transport goods to port for export.27 

A lack of backhauling opportunities for agricultural producers that possess trucking fleets 

can also contribute to higher transportation costs. For example, a majority of swine 

slaughterhouses have their own trucking fleets. However, many trucks returning from 

delivering product to the port are unable to reduce per unit transportation costs by 

backhauling goods like fertilizer because incompatible shipment schedules limit the 

availability of goods.28

Poor road conditions, compounded by road congestion during peak harvest periods, can 

result in a substantial loss in grains or oilseeds. A farm organization (Famato) in Mato 

Grosso estimated that approximately 0.3 percent (51,000 tons) of the state’s soybean crop 

is lost because it dribbles out the back of trucks while the crop is being transported over 

bumpy roads to Brazilian ports.29 Severely potholed or under-maintained roads also lead 

to frequent delays, excessive repair and maintenance costs for trucks, and road accidents, 

 20 ILOS, Logistics Overview in Brazil 2008, 2008, 14. 

21 Ibid. 

22 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011; industry 

representative, interview by USITC staff, Rio de Janeiro, Brazil, September 2, 2011; ILOS, Logistics 

Overview in Brazil 2008, 2008, 14. 23 Soybean and Corn Advisor, “A Record Soybean Crop in Brazil,” January 13, 2009. 24 Ibid. 

25 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 26 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 27 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011; industry 

representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 28 Industry representative, interview by USITC staff, Cuiaba, Mato Grosso, Brazil, August 31, 2011. 29 Soybean and Corn Advisor, “Poor Roads Causing Transportation Losses in Brazil,” n.d. 
3-7 

which are reportedly common for trucks.30 A recent survey by the CNT found that poor 

conditions in paved roads in Brazil increase the operating costs of trucks by 28 percent 

compared with trucks operating on paved roads in optimal condition.31

Poor infrastructure conditions and transportation inefficiencies not only increase the cost 

of transporting agricultural goods for export, but also increase the cost of domestically 

produced inputs, such as feed grains (e.g., corn and soybeans) that are transported to pork 

and poultry feed mills located in southern Brazil.32 For example, the price of corn at the 

port of Fortaleza in Ceará state in northeastern Brazil is reportedly more than double that 

in the corn-producing area of Sorriso in Mato Grosso.33 As a result, meat processors 

increasingly view it as more cost-effective to locate their operations near grain-producing 

areas.34 For instance, the fast-growing production of grains in the Center-West has led to 

a rapid expansion of poultry and swine operations there, as unit costs to transport poultry 

or pork products for export are less than the unit costs of transporting feed grain inputs 

(see chapter 8 for poultry and chapter 10 for pork). 

Public and private sector investments are improving and expanding road networks in 

Brazil. For example, road projects funded by public investments through the PAC, 

discussed later in this chapter, include rehabilitating over 53,000 km of Brazil’s existing 

road network, expanding almost 2,000 km of existing road capacity, and constructing 

3,000 km of new highways.35 One notable road project includes the paving of highway 

BR-163, a vital transportation corridor linking northern Mato Grosso with the port of 

Santarém in Pará state. Forecast to be completed by 2012, the paved highway is expected 

to reduce transit times and to lower the cost of transporting soybeans by up to $20 per 

metric ton (mt).36 However, heavy road congestion along the highway complicates efforts 

to complete paving along the 1,400 km route. For example, although 800 km of the 

northern portion of the highway linking Sinop to Santarém have yet to be paved,37 efforts 

are already being made to widen paved portions of the highway located south of Sinop to 

reduce heavy traffic congestion (figure 3.2). The recently completed Transoceanic 

Highway linking Brazil’s fertile agricultural regions in the Center-West through the 

western state of Acre to the port San Juan de Marcona along Peru’s south-eastern coast is 

expected to boost bilateral trade and promote integration between Brazil and Peru. 

However, it is unlikely that the mountainous route will serve as a viable transport 

alternative to export Brazilian commodities such as soybeans to Asian markets, as it 

remains more cost effective to transport product in barges along Brazil’s river system to 

the Atlantic coast.38

 30 USDA, FAS, Brazil: Grain Transportation and Storage Infrastructure, November 16, 2005, 5. 31 USDA, AMS, Soybean Transportation Guide: Brazil 2009, July 2010, 40. 

32 USDA, FAS, Brazil: Grain Transportation and Storage Infrastructure, November 16, 2005, 5. 33 Ibid., 4. 

34 Desouzart, “Structural Changes in the Brazilian Poultry Sector 1995 to 2005,” 2007, 39–45. 35 Brazil Ministry of Transport, “Logistic Infrastructure Scenario in Brazil,” 2010. 36 Costa and Rosson, “Improving Transportation Infrastructure in Brazil,” 2007, 10. 37 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 38 Bodzin, Steven,“Peru’s New Highway to the Future,” The Christian Science Monitor, June 25, 2011; 

Bank Information Center, “Southern Interoceanic Highway (Peru-Brazil),” (accessed March 8, 2012). 
3-8 

FIGURE 3.2 Expansion of the BR-163 highway is intended to reduce congestion 

Source: USITC staff. 

In order to spur greater private investment in and management of public road networks, 

the government launched a federal highway concession program in the 1990s. Under the 

program, private entities operate road concessions, generally for periods of 25 years.39

Most concessions were initially concentrated in the southern economic centers of Rio de 

Janeiro and São Paulo, and have expanded along the southeastern coast to include the 

states of Rio Grande do Sul, Santa Catarina, and Paraná to the south, and Minas Gerais 

and Bahia to the north.40 According to a recent survey, almost 90 percent of highways 

under private concession are in good or very good shape, compared with only 32 percent 

of publicly managed highways.41 However, the number of concessions is not large. As of 

2009 about 50 concessionaires were managing only 15,000 km, or about 7 percent of 

Brazil’s paved road network and less than 1 percent of Brazil’s total road network (paved 

 39 Mourougane and Pisu, “Promoting Infrastructure Development in Brazil,” 2011, 24. 40 Brazil Ministry of Transport, “Logistic Infrastructure Scenario in Brazil,” 2010. 41 Mourougane and Pisu, “Promoting Infrastructure Development in Brazil,” 2011, 24. 
3-9 

and unpaved).42 Nevertheless, public sector investment will likely remain a principal 

driver of improvements to Brazil’s road network. 

Rail 

Rail transport accounts for 25 percent of Brazil’s total freight volume.43 Brazil’s rail 

network is relatively small given the country’s size, covering about 30,000 km, or oneseventh the size of the rail network in the United States.44 About 50 percent of Brazil’s 

rail network is concentrated in the south and southeastern states of São Paulo, Minas 

Gerais, Rio de Janeiro, and Rio Grande do Sul.45 These areas are rich in mineral deposits, 

including iron ore, which accounts for the majority of rail freight.46 In contrast, there is 

low geographic rail coverage in the larger grain-producing Center-West region. 

After years of underinvestment and low maintenance, Brazil’s rail network was 

privatized in the mid-1990s to spur investment and improve productivity in the sector. As 

a result of privatization, 95 percent of Brazil’s rail network is now reportedly operated by 

five private groups and two state-owned companies under 12 different concessions.47

Valec Engenharia Construções e Ferrovias (Valec), a state-owned company operating 

under the auspices of the Ministry of Transport, is responsible for managing new railway 

construction, developing feasibility studies for new rail lines, and signing contracts and 

agreements with rail operators to implement investment projects.48

The concentration of rail operators, the limited competition, the relatively disconnected 

networks under concession, and the system’s limited capacity to transport agricultural 

bulk products rather than iron ore have reportedly led to rent-seeking and monopoly 

pricing.49 As a result, some agricultural producers believe costs for rail transport are only 

marginally less than for truck transport, if at all.50 In addition, although recent changes to 

concession agreements reportedly require rail operators to allocate a certain percentage of 

 42 Mourougane and Pisu, “Promoting Infrastructure Development in Brazil,” 2011, 24; Brazil Ministry 

of Transport, “Logistic Infrastructure Scenario in Brazil,” 2010. 43 WEF, The Brazil Competitiveness Report 2009, 2009, 35. 44 The United States has the largest rail network in the world (225,000 km), followed by Russia 

(87,000 km), China (86,000 km), and India (64,000 km). In comparison, Brazil’s rail network ranks 10th in 

the world. Brazil Ministry of Transport, “Logistic Infrastructure Scenario in Brazil,” 2010; EIU, The Global 

Power of Brazilian Agribusiness, 2010, 10; CIA, World Factbook, December 1, 2011. 45 ILOS, Logistics Overview in Brazil 2008, 1. 

46 Brazil is one of the world’s leading producers and exporters of iron ore, which has traditionally 

accounted for the majority of rail freight in Brazil. 47 Brazil Ministry of Transport, “Logistic Infrastructure Scenario in Brazil,” 2010; Mourougane and 

Pisu, “Promoting Infrastructure Development in Brazil,” 2011, 23. A concession generally refers to an 

agreement under which a private entity is granted the right to operate a public asset. 48 Valec Web site, http://www.valec.gov.br (accessed November 17, 2011); Mourougane and Pisu, 

“Promoting Infrastructure Development in Brazil,” 2011, 23. 49 Industry representative, interview by USITC staff, Mato Grosso and São Paulo, Brazil, August 23 

and 28, 2011; Mourougane and Pisu, “Promoting Infrastructure Development in Brazil,” 2011, 23. 50 Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 28, 2011; industry 

representatives, interviews by USITC staff, São Paulo, Brazil, August 23, 2011. 
3-10 

rail capacity to products other than iron ore, rail prices are reportedly pegged to trucking 

prices as a result of limited competition and cartel-like pricing behavior.51

The high costs associated with expanding and maintaining rail lines, as well as the 

limited geographic connectivity among networks operating under different concessions, 

reportedly deter private investment in developing and upgrading Brazil’s rail network.52

As a result, expansion of the country’s rail infrastructure will still depend in large part on 

public investment through Valec and the PAC. For example, in 2011 alone, Valec’s 

investment budget of R$2.4 billion ($1.4 billion) reportedly accounted for 10 percent of 

all Brazilian government and private investments made in the national railway network 

since 2000.53 In addition, 30 percent of the R$43.9 billion ($25.7 billion) of PAC funds 

earmarked for the development of Brazil’s railways during 2011–14 will reportedly be 

financed by the public sector.54 However, Valec has in some cases subcontracted the 

operation, maintenance, and improvements of certain segments of rail lines under 

construction to private operators (i.e., subconcessionnaires) in order to help fund other 

segments either under construction or planned for construction.55

Significant efforts are underway to expand and integrate Brazil’s rail network to better 

connect agricultural producing regions to ports, reduce transportation costs, and increase 

the share of freight transported by rail. Once completed, the North-South rail line will 

link the states of Maranhão, Tocantins, and Goiás to the port of Belém in the northern 

state of Pará (figure 3.3). About 570 km are already in use, and another 720 km were 

expected to be completed in 2011.56 The West-East rail line will link agricultural areas in 

Tocantins state to the port of Ilhéus in Bahia state. Construction of the first section of the 

1,490-km rail line has reportedly begun.57 The Center-West rail line, currently under 

construction, would link eastern Mato Grosso to the port of Santos, and eventually form 

the backbone of a transcontinental railway connecting eastern and western Brazil.58 Some 

agricultural producers believe that although the proposed rail line would increase 

capacity to transport agricultural products by rail, a lack of competition among rail 

operators will mitigate any cost advantages of the line. The impact of the proposed rail 

line on costs remains uncertain.59

 51 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. According 

to one industry representative, in order to comply with the law, rail operators can either allow other 

locomotives rail access and charge a user fee, or charge a fee for pulling other companies’ rolling stock. 52 Mourougane and Pisu, “Promoting Infrastructure Development in Brazil,” 2011, 23. Differences in 

rail gauge also limit connectivity. 53 Valec Web site, http://www.valec.gov.br (accessed November 17, 2011). 54 Mourougane and Pisu, “Promoting Infrastructure Development in Brazil,” 2011, 23. 55 Valec Web site, http://www.valec.gov.br (accessed November 17, 2011). Most notably, in 2007 

Valec awarded a R$1.4 billion ($717 million) 30-year subconcession to Brazil iron ore miner Vale (formerly 

Companhia Vale do Rio Doce or CVRD) to operate a portion of the North-South railway that will eventually 

link the states of Maranhão, Tocantins, and Goiás. The capital provided by CVRD is used by Valec to fund 

other portions of the line under construction. 56 Felsberg e Associados, “Perspectives for the Brazilian Railway Sector for 2011,” February 2011. 57 Ibid. 

58 Ibid. 

59 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 
3-11 

FIGURE 3.3 Current and future railroad development may lower transport costs 

Source: APROSOJA, “Outlook for Internal and Port Infrastructure Growth in Brazil,” January 2010. 

Note: For the full name of each Brazilian state, see figure 1.1 in chapter 1. 

River Transport 

Inland waterways account for about 13 percent of cargo transported in Brazil.60 Despite 

having a river network longer than that in the United States, Brazil underuses its inland 

waterways. For instance, there are 28,000 km of navigable inland waterways in Brazil, 

with a potential to develop an additional 15,000 km; however, only about 13,500 km, or 

 60 Brazil Ministry of Transport, “Logistic Infrastructure Scenario in Brazil,” 2010. 

North-South 

Railroad

EastWest 

Railroad Ferronorte Railroad

Center-West Railroad

Rondonópolis
3-13 

FIGURE 3.4 Primary Brazilian waterway export routes 

Source: USITC staff. 

Note: The arrows illustrate the direction of flow on the primary navigable waterways used to transport agricultural exports. While 

other waterways are often used to transport goods within the country, such as the Sao Francisco and Tocantins Rivers, most are 

not fully navigable and/or are not commonly used for agricultural exports.
3-12 

less than half of all navigable inland waterways, are used commercially to transport 

cargo.61

Inland waterways transport an estimated 45 million tons of cargo annually via eight 

waterways, 62 including agricultural and mineral products, construction material, and 

fertilizers.63 With the exception of the Tietê-Paraná waterway, Brazil’s inland waterways 

do not connect population or economic centers, and as a result, transshipment operations 

are necessary to transport goods to their final destination.64 For instance, grains from 

Mato Grosso transported by barge from the port of Velho, Rondônia, north along the 

Madeira River are transferred to oceangoing vessels at the port city of Itacoatiara along 

the Amazon River for export. Likewise, grains from Mato Grosso transported by barge 

along the Teles Pires-Tapajós waterway are transferred to oceangoing vessels at the port 

of Santarém along the Amazon River for export.65 Other major waterways, such as the 

Tocantins River, cannot be used for export because they are not fully navigable due to the 

presence of dams (figure 3.4). Other factors limiting the use of inland waterways as a 

viable transport alternative include a lack of investment in facilities and in improvements 

to navigable rivers, a lack of locks to allow the passage of barges at hydroelectric plants, 

and pressures against developing waterways in environmentally sensitive areas.66

The government recognizes the need to further develop Brazil’s waterways as a less 

costly alternative to road transport, pointing to low levels of investment in the sector in 

the past.67 Future public investment in waterways will reportedly include R$2.7 billion 

($1.6 billion) in PAC funds for the construction of seven waterways and 34 terminals.68

Brazil’s National Agency for Waterway Transportation (ANTAQ), a government 

regulatory body that oversees Brazil’s inland waterways and ports, and the Ministry of 

Transport are preparing studies on the development and expansion of Brazil’s inland 

waterways.69

Storage and Warehouse Capacity 

Storage capacity for grains has not kept pace with increased agricultural production in 

Brazil, and as a result the country has experienced a shortage of warehousing capacity for 

agricultural goods, estimated at around 40 million tons per year.70 In contrast to the 

 61 Brazil Ministry of Transport, “Logistic Infrastructure Scenario in Brazil,” 2010. 62 There are a total of about 13,650 km of inland waterways in use in Brazil, including the following: 

Amazonas-Madeira (4,160 km), Tocantins-Araguaia (3,040 km), Tietê-Paraná (1,660 km), São Francisco 

(1,370 km), Paraguai (1,320 km), and the Tapajós (1,050 km). Brazil Ministry of Transport, “Logistic 

Infrastructure Scenario in Brazil,” 2010. 63 Brazil Ministry of External Relations, Brazilian Ports, 2008, 24. 64 Caixeta-Filho, “Transportation and Logistics in Brazilian Agriculture,” 2003, 11; Caixeta-Filho, 

“The Determinants of Transport Costs in Brazil’s Agribusiness,” 2008, 5. 65 Caixeta-Filho, “The Determinants of Transport Costs in Brazil’s Agribusiness,” 2008, 5. 66 EIU, The Global Power of Brazilian Agribusiness, 2010, 11; WEF, The Brazil Competitiveness 

Report 2009, 2009, 35. 67 Pires, “Brazil: Waterways Gain Prominence in 2011,” March 1, 2011. 68 Ibid. 

69 Pires, “Brazil: Waterways Gain Prominence in 2011,” March 1, 2011; ANTAQ, Waterway 

Panaroma, 2010, 90. 70 EIU, The Global Power of Brazilian Agribusiness, 2010, 11; Guasch et al., “Logistics, Transport, and 

Food Prices in LAC,” 2009, 20. 
3-14 

United States, on-farm storage at small farms is relatively uncommon in Brazil. Only 

about 11 percent of storage capacity is located on farms,71 and as a result, most small 

landholding farmers must outsource storage and logistics functions.72 Because volumes 

produced by many smaller farmers in the southern states are limited, the per unit cost of 

financing and insuring inventories over time are high, which reduces the incentive to 

store product. The high cost of capital and limited access to financing also reportedly 

hamper the ability of farmers to build on-site storage.73

In addition, regional storage capacity is uneven. Although the inland agricultural 

producing regions of Mato Grosso and other states within the Center-West account for 

70 percent of the country’s agricultural production, storage capacity is still concentrated 

in southern Brazil, creating distribution problems during harvest season.74 Despite the 

need to build additional storage capacity in the Center-West, where agricultural land 

expansion is occurring, construction of these facilities is reportedly slow. 75 Storage 

capacity may also be uneven seasonally, leading to increased storage costs between 

harvest seasons. For example, although adequate storage space for corn may be available 

during the first growing season, storage costs may be 50 percent higher during the second 

growing season because of a lack of adequate capacity to store the additional corn that is 

harvested after the second planting.76

The lack of on-farm storage capacity can reduce farmer incomes. For example, farmers 

reportedly lose an average of $1 per bushel of soybeans because they are forced to sell at 

the time of harvest when prices are the lowest instead of storing inventory and waiting to 

sell when prices are higher. The price differential can be significant: in 2010, the price of 

soybeans at harvest time (April) in Mato Grosso was reportedly $8 per bushel, whereas it 

was $11 per bushel in September.77 Insufficient storage space also results in the loss of 

grains and other agricultural products due to spoilage. For example, one study found that 

almost 9 percent of grains harvested in Brazil were lost during post-harvest storage and 

transportation as a result of insufficient storage space and long transportation distances to 

ports for export. Poor storage conditions and improperly sealed trucks contribute to an 

estimated loss of one million mt of rice each year.78 In addition, Brazil reportedly lacks 

enough intermodal transfer terminals, which connect storage and warehousing 

infrastructure to rail networks. According to one estimate, a doubling of intermodal 

transfer terminals in Brazil could reduce inventory and warehousing costs by as much as 

$1 billion annually.79 The development of efficient transport infrastructure connecting 

warehousing and storage facilities to ports has been cited by at least one large agricultural 

trader as the most critical component of the supply chain for future development.80

 71 EIU, The Global Power of Brazilian Agribusiness, 2010, 11. 72 Guasch et al., “Logistics, Transport, and Food Prices in LAC,” 2009, 20. 73 Industry representative, interview by USITC staff, Paraná, Brazil, August 29, 2011. 74 EIU, The Global Power of Brazilian Agribusiness, 2010, 11. However, the proximity of storage 

facilities to production areas varies. For example, some larger agricultural traders reportedly store crops from 

Mato Grosso in facilities located in Paraná for export through southern ports such as Paranaguá and Santos. 

Industry representative, interview by USITC staff, Paraná, Brazil, August 30, 2012. 75 Industry representative, interview by USITC staff, Paraná, Brazil, August 29, 2011. 76 Industry representative, interview by USITC staff, São Paulo, Brazil, August 22, 2011. 77 EIU, The Global Power of Brazilian Agribusiness, 2010, 11. 78 USDA, FAS, Brazil: Grain Transportation and Storage Infrastructure, November 16, 2005, 9. 79 Guasch et al., “Logistics, Transport, and Food Prices in LAC,” 2009, 20. 80 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 
3-15 

In some cases, smaller farmers have found creative ways to overcome the lack of on-farm 

storage capacity. For example, some producers in Paraná, Mato Grosso, and Bahia have 

used on-site plastic storage bags as a practical alternative.81 However, most producers 

reportedly do not follow this practice, as the warm, moist climate can lead to mold and 

spoilage.82 Larger producers that have the means to do so invest more in their own 

storage and warehousing, often relying on loans provided by BNDES, Brazil’s national 

development bank.83 Likewise, cooperatives that pool together the resources and harvests 

of small farmers have invested in their own storage and warehousing.84

Ports 

Brazil has one of the longest coastlines in the world, and seaports play a critical role in 

the country’s ability to trade. Brazil’s port system comprises 50 ports (including sea and 

river ports) located in almost all of the coastal states (figure 3.5). All ports but one are 

owned and controlled either by federal port companies or by states or local 

municipalities.85 Despite public ownership of ports, most public ports are operated by 

private terminals based on long-term lease agreements of 25 years or more,86 a product of 

government regulatory reform and privatization efforts in the 1990s (box 3.2). According 

to ANTAQ, private terminals account for roughly two-thirds of the cargo transported 

through Brazil’s port system. If public terminals that are rented and operated by private 

companies are included, the private sector is responsible for transporting over 90 percent 

of the cargo that goes through Brazil’s port system.87

Despite Brazil’s status as a major commodity exporter, the country’s port system is 

generally characterized as relatively small, inefficient, and expensive. For instance, 

Brazil’s seven largest ports combined handled only 475 million mt of cargo in 2009, 

significantly less than the 516 million mt of cargo volume that the three largest U.S. ports 

handled combined.88 A lack of harbor capacity and insufficient dredging depths limit the 

number and size of ships that can access the ports.89 For example, while most Brazilian 

ports can handle Panamax-sized ships,90 only seven ports are capable of handling larger 

 81 USDA, FAS, Brazil Grain Transportation and Storage Infrastructure, November 16, 2005, 9; EIU, 

The Global Power of Brazilian Agribusiness, 2010, 12. 82 USDA, FAS, Brazil: Grain Transportation and Storage Infrastructure, November 16, 2005, 9. 83 Industry representative, interview by USITC staff, São Paulo, Brazil, August 22, 2011. 84 Industry representative, interview by USITC staff, Paraná, Brazil, August 29, 2011. 85 Brazil Ministry of Transport, “Logistic Infrastructure Scenario in Brazil,” 2010. There are 26 federal 

port companies, 23 state- and municipality-run ports, and one private port. The port of Imbituba, located in 

Santa Catarina state, is the only privately operated port in Brazil. A 1941 governmental decree authorized 

Companhia Docas de Imbituba, a Brazilian company, to operate the port for a period of 70 years. The 

agreement expires in 2012. Port of Imbituba Web site, http://www.cdiport.com.br (accessed November 4, 

2011). 86 Industry representative, interview by USITC staff, Santos, Brazil, August 24, 2011. 87 Brazil Ministry of External Relations, Brazilian Ports, 2008, 14. 88 AAPA, World Port Rankings 2009. Typically, the three largest ports in the United States in terms of 

volume handled are New Orleans, Galveston (Houston), and New York–New Jersey. In Brazil, the seven 

largest are the ports of Itaqui, Sepetiba, Tubarão, Santos, São Sebastião, Angra dos Reis, and Paranaguá. 89 EIU, Brazil Risk, 2010. 90 “Panamax” refers to the size limits and requirements of ships traveling through the Panama Canal; 

“Capesize” vessels are considerably larger. 
3-16 

FIGURE 3.5 Ports in Brazil 

Source: USDA, AMS, Soybean Transportation Guide: Brazil 2010, July 2011, 30. 

Note: A survey port is a Brazilian port where cargo data are collected. These ports are responsible for more than 

98 percent of Brazilian cargo movement. 

 
3-17 

BOX 3.2 Port Reforms and Investments in Brazil 

Beginning in the early 1990s, the Brazilian government enacted several reforms to improve the country’s ports. 

Efforts to privatize public-sector infrastructure began with the Port Modernization Enactment of 1993, which opened 

public sector port operations to private companies under long-term concession contracts. In 2007, the government 

created the Special Secretariat for Ports (SEP), a presidential agency responsible for oversight of investments in 

Brazil’s ports. The SEP, working alongside ANTAQ, established the National Dredging Plan to oversee an investment 

of R$1.2 billion ($615 million) in dredging operations to increase channel depths and mooring berths at 16 ports.b

 The 

program will allow larger ships to berth for loading, increase cargo-handling capacity, and help relieve port 

congestion. The government has allowed foreign companies to participate to spur investment and competition in 

order to reduce costs.c

Recent government reforms have enabled greater private participation and investments in Brazil’s ports, and have 

helped to reduce handling costs for containers and goods at Brazil’s ports.d

 In 2008, a government decree allowed 

both Brazilian and foreign companies to build and operate terminals and new public ports under concession. The 

decree also eliminated the requirement that private terminal operators handle private- or mixed-use cargoes.e As a 

result, private companies will be able to operate terminals without the need to own or handle cargo. The first ports 

offered under this model will be Manaus, Amazonas, and Ilhéus, Bahia.f

 These reforms are expected to attract 

R$19 billion ($11.3 billion) in private sector investments in the coming years.g

_____________ a ILOS, Logistics Overview in Brazil 2008, 2008, 4; Brazil Ministry of External Relations, Brazilian Ports, 2008, 14; 

WEF, The Brazil Competitiveness Report 2009, 2009, 35. b Brazil Ministry of External Relations, Brazilian Ports, 2008, 10. c Ibid. 

d Ibid., 14. e Brazil Ministry of External Relations, Brazilian Ports, 2008, 13, 16. Private cargoes are owned by the terminal 

operators. Mixed-use cargoes are private cargoes combined with cargoes owned by third parties. f Brazil Ministry of External Relations, Brazilian Ports, 2008, 16. 

g Brazil Ministry of External Relations, Brazilian Ports, 2008, 4.

Capesize-generation ships, which typically operate at lower per-ton freight costs.91 Lack 

of physical space at ports can also hamper efforts to expand terminal capacity, as 

greenfield construction often takes several years and is subject to significant 

environmental assessment and impact studies.92

Inland port access and capacity for trucks carrying goods for export are often limited, 

leading to major delays during peak harvest periods. For example, lines of trucks waiting 

to unload grain at major grain terminals can stretch up to 30 miles, and trucks can wait up 

to 20 days to unload;93 these backups contribute to high demurrage costs for ships waiting 

to be loaded. In 2010, long delays caused by a backlog of vessels waiting to load sugar 

cargoes at Brazil’s ports reportedly helped to push the price of global sugar futures 

contracts to seven-month highs, above $0.25 per pound.94 Outdated equipment, labor-

 91 WEF, The Brazil Competitiveness Report 2009, 2009, 34. All things being equal, Capesizegeneration ships can reportedly operate at a cost of $12 per ton, while Panamax-sized ships operate at 

$36 per ton. 92 Industry representative, interview by USITC staff, Santos, Brazil, August 24, 2011. 93 EIU, The Global Power of Brazilian Agribusiness, 2010, 11. 94 Brough and Saul, “Brazil Port Sugar Delays Seen Easing Next Season,” September 23, 2010. 
3-18 

intensive port processes, and inadequate port administration also reportedly contribute to 

port inefficiencies.95

Although Brazil’s port infrastructure is generally considered inadequate, some large 

agricultural producers and traders, along with other private terminal operators such as oil 

and iron ore producers, have invested in larger, more efficient terminals. For example, 

one terminal at Santos leased as a joint venture between two large agricultural traders is 

capable of handling 4 million mt per year of soybeans and corn, and is considered the 

most productive terminal at the port.96 However, additional investments in this terminal 

to allow ship loadings during rainy weather have reportedly been hampered by capital 

constraints and some uncertainties related to renewing the lease on the terminal.97

Private-sector investments in port terminals are improving overall port capacity and 

efficiency. For example, in 2008 Brazilian iron-ore miner Vale announced investments of 

R$4 billion ($2.2 billion) to expand six port terminals in Brazil.98 Three companies that 

operate terminals at the port of Santos, including Cosan, Brazil’s top sugar exporter, are 

reportedly investing in covers at berths to enable the loading of bulk sugar when it 

rains. 99 Cosan is also reportedly investing R$280 million ($167 million) to increase 

capacity at two terminals to 18 million mt per year, and has contracted with rail 

concessionaire America Latina Logistica (ALL) to make investments in locomotives, 

rolling stock, and track to increase the volume of sugar shipments to Santos.100 In 2011, 

Brazilian private terminal operator Empresa Brasiliera de Terminais Portuários 

(Embraport) began construction of a new mixed-use container terminal at Santos port. 

The terminal, financed in part through the Inter-American Development Bank and 

BNDES, will have an annual capacity of 2 million 20-foot equivalent units and be able to 

handle bulk liquids such as ethanol. The terminal is expected to be completed by 2013.101

Government Programs to Improve Transportation Infrastructure 

As noted earlier, the government recognizes the need to improve Brazil’s transportation 

infrastructure and has developed federal plans to increase both public and private 

investment in infrastructure projects. Through its National Plan for Transportation and 

Logistics (NPTL) and the Growth and Acceleration Program (PAC), the government 

intends to undertake significant levels of public investment in infrastructure development 

in coming years to improve and expand railways, waterways, road networks, and ports. 

Loans provided by Brazil’s national development bank, BNDES, often underpin private 

investment in infrastructure projects. 

 95 EIU, The Global Power of Brazilian Agribusiness, 2010, 11; WEF, The Brazil Competitiveness 

Report 2009, 2009, 34. 96 Industry representative, interview by USITC staff, Santos, Brazil, August 24, 2011. 97 Ibid. 

98 Brazil Ministry of External Relations, Brazilian Ports, 2008, 14. 99 Brough and Saul, “Brazil Port Sugar Delays Seen Easing Next Season,” Reuters, September 23, 

2010. 100 Murphy, “Cosan Invests to Boost Brazil Port Sugar Capacity,” Reuters, November 3, 2010. 101 IDB, “IDB Closes $430 Million Syndicate Loan to Brazil’s Embraport Project,” November 25, 

2011; Grupo Coimex Web site, http://www.coimex.com.br (accessed December 20, 2011). 
3-19 

National Plan for Transportation and Logistics (NPTL) 

In 2003, the Ministry of Transport undertook a review of infrastructure conditions, which 

resulted in the formation in 2006 of the NPTL, a longer-term strategic plan covering 

2008–23 to improve transportation infrastructure in Brazil and reduce the country’s 

overreliance on road transport. 102 The plan calls for a reduction in the use of road 

transport from 58 to 30 percent of cargo transported, an increase in the use of railways 

from 25 percent to 35 percent, and an increase in the use of waterways from 13 percent to 

29 percent.103

To do so, the NPTL has identified hundreds of potential or viable infrastructure projects 

in railways, waterways, ports, and airports. However, while many NPTL projects are 

funded through the PAC (discussed in more detail below) as well as through other 

sources, the NPTL lacks dedicated sources of funding for specific projects. As a result, 

the NPTL has been characterized by some as more of a wish list of projects lacking 

strategic direction, rather than a coherent plan to improve transport infrastructure in 

Brazil.104

The plan allocates targeted investments totaling R$291 billion ($146 billion) over three 

periods (table 3.1). Investments in railways account for 52 percent of allocated funds 

during 2008–23, followed by highways (24 percent), ports (13 percent), and inland 

waterways (5 percent) (table 3.2). Over two-thirds of NPTL investments are allocated to 

the Center-South, East, and South regions (“vectors”), which include, among others, the 

states of Mato Grosso, Mato Grosso do Sul, Rio Grande do Sul, Paraná, Minas Gerais, 

Goiás, and Bahia (table 3.3).105

TABLE 3.1 NPTL investments by phase, 2008–23 

Phase Total investment Share of total

Billion R$ Billion $ Percent

I: 2008–2011 109.2 54.7 37.6

II: 2012–2015 84.3 42.2 29.0

III: 2015–2023 97.3 48.7 33.4

 Total 290.8 145.6 100.0

Source: USDA, AMS, Soybean Transportation Guide: Brazil 2009, July 2010, 11–12. 

 

 102 Howell, Building Brazil, 2008, 4, 16. 103 Brazil Ministry of Transport, “Logistic Infrastructure Scenario in Brazil,” September 21, 2010. 104 Industry representative, interview by USITC staff, Rio de Janeiro, Brazil, September 2, 2011. 105 Investments are allocated to logistics “vectors,” or regions, that have been designated by the 

Ministry of Transport. Logistics vectors include the Amazon, the Center-North, the Upper Northeast, the 

Center-Northeast, the East, the Center-South, and the South. Logistics vectors do not correspond directly to 

the macroregions of Brazil classified by the Brazilian Institute of Geography and Statistics, the agency 

responsible for geographic and cartographic information in Brazil. In addition, states may be covered by 

more than one vector. For example, Mato Grosso state is covered under portions of the Amazon, CenterNorth, and Center-South logistics vectors. See Brazil Ministries of Transport and Defense, National Plan for 

Transportation and Logistics Annual Report, 2009, 14. 
3-20 

TABLE 3.2 NPTL allocations by transport mode, 2008–23 

Transport mode Total investment Share of total

Billion R$ Billion $ Percent

Air 13.0 6.5 4.5

Railways 150.1 75.2 51.6

Inland waterways 15.8 7.9 5.4

Ports 38.9 19.5 13.4

Highways 69.7 34.9 24.0

All other 3.2 1.6 1.1

 Total 290.8 145.6 100.0

Source: USDA, AMS, Soybean Transportation Guide: Brazil 2009, July 2010, 11–12. 

TABLE 3.3 NPTL investments by logistics vector and transport mode (%) 

Transport mode Amazon

CenterNorthCenterSouth EastCenterNorthwest UpperNortheast South

Air 5.3 6.6 28.2 20.8 2.8 25.0 11.4

Railways 6.8 6.2 37.4 24.2 5.9 4.5 14.9

Inland waterways 31.3 29.7 13.0 9.6 1.7 1.0 13.7

Ports 2.6 8.7 20.8 41.5 4.0 5.3 17.0

Highways 16.5 9.1 15.5 14.6 12.0 14.4 18.0

All other 0 49.3 24.3 7.2 0.5 16.5 2.5

% of total NPTL investments in Brazil 9.8 9.0 28.1 23.1 6.7 7.9 15.6

Source: Brazil Ministries of Transport and Defense, National Plan for Transportation and Logistics, Annual Report, 

2009, 19. 

Note: Totals may not add due to rounding. 

Investments by infrastructure mode are relatively concentrated within specific regions. 

For example, over 60 percent of rail investments are allocated to the Center-South and 

East, and will help improve rail access from the soy-producing areas of Mato Grosso to 

the main ports of Santos and Paranaguá. Likewise, over 60 percent of investments slated 

for waterways are concentrated in the Amazon and Center-North regions, including the 

states of Mato Grosso, Amazonas, and Pará, where the potential to develop viable 

waterways is greatest. Improvements in roads, railways, and waterways will help reduce 

transportation costs and improve the area’s agricultural cost-competitiveness. 

Growth and Acceleration Program (PAC) 

In 2007, the government introduced the PAC, a short-term plan covering the 2007–10 

period. The PAC’s goal was to promote social and economic development, primarily by 

improving employment and income opportunities, reducing regional disparities within 

Brazil, and increasing investment in infrastructure. 106 The plan provides tax cuts, 

investment incentives, and short- and long-term financing for energy-related, social, and 

infrastructure projects. Of the R$504 billion ($258 billion) planned for the PAC, funds 

devoted to transportation infrastructure (R$58 billion, or $30 billion) account for 

11.5 percent of the total.107 Some infrastructure projects identified through the NPTL 

were subsequently incorporated into PAC projects. For example, PAC funds allocated to 

investments in transportation infrastructure account for 80 percent of the first phase 

 106 USDA, AMS, Soybean Transportation Guide: Brazil 2009, July 2010, 11. 107 Howell, Building Brazil, 2008, 16. Energy-related projects account for the largest portion of PAC 

funds (55 percent, or R$275 billion [$149 billion]), followed by social programs (34 percent or R$171 billion 

[$93 billion]). 
3-21 

(2008–11) of the NPTL.108 The private sector reportedly accounts for 30 percent of PAC 

funding overall,109 while federal government budgets account for the remainder of funds 

envisioned for PAC projects.110

The PAC has not come without criticism, and assessments of the effectiveness of the 

program are mixed. For example, out of total PAC funding allocated, estimates of the 

amount spent on completed PAC projects or works in progress reportedly ranged from a 

high of 63 percent to a low of 14 percent. 111 Factors contributing to project delays 

reportedly include excessive bureaucracy, environmental concerns, and a delay in the 

release of funds. 112 In addition, the plan has been criticized as misleading, as 

infrastructure projects from past government efforts reportedly account for the majority 

of PAC projects.113 Nevertheless, in March 2010, the government announced the creation 

of the PAC 2, a continuation of the PAC to further boost spending during the 2011–14 

period, particularly in preparation for the 2014 World Cup and the 2016 Olympics to be 

held in Brazil. Funding for transportation infrastructure projects will account for about 

11 percent (R$105 billion, or $63 billion) of total funds allocated to the PAC 2.114

However, problems are said to persist. Allegations of corruption and bribery at the 

Ministry of Transport and the National Department of Transportation and Infrastructure 

(DNIT), a regulatory agency, have reportedly led to mass resignations, causing funding 

and construction delays and project cancellations for many PAC 2 projects overseen by 

the ministry and the DNIT.115 The DNIT expects that only 74 percent of transportation 

goals outlined in the PAC 2 will be met by 2014.116 As of August 2011, only 1 percent of 

planned projects were reported to be finished, with 27 percent underway and 4 percent 

still in the bidding stage.117

The Role of BNDES in Transportation Infrastructure Development 

BNDES, Brazil’s national development bank, is the main financing agent for long-term 

investments in infrastructure in Brazil. BNDES supports infrastructure development and 

financing primarily through three functions: financing technical studies, research, and 

project development in potential or specific infrastructure projects; 118 conducting 

technical assessments of projects and structuring of concessions or public-private 

partnerships (PPPs);119 and lending directly to private companies or through financial 

 108 Howell, Building Brazil, 2008, 17. 109 Mourougane and Pisu, “Promoting Infrastructure Development in Brazil,” 2011, 11. 110 Howell, Building Brazil, 2008, 4; “Brazil PAC 2 Spending Plans,” Rio Times, January 4, 2011. 111 Skalmusky, “Brazil PAC 2 Spending Plans,” Rio Times, January 4, 2011. 112 Skalmusky, “Brazil PAC 2 Spending Plans,” Rio Times, January 4, 2011. 113 WEF, The Brazil Competitiveness Report 2009, 2009, 32. 114 “Brazil PAC 2 Spending Plans,” Rio Times, January 4, 2011. 115 Industry representative, interview by USITC staff, Cuiabá, Brazil, August 31, 2011; Skalmusky, 

“PAC 2 Stumbles on Scandals in DNIT,” Rio Times, August 2, 2011. 116 Skalmusky, “PAC 2 Stumbles on Scandals in DNIT,” Rio Times, August 2, 2011. 117 Ibid. 118 BNDES, Annual Report 2009, 2009, 106; “BNDES Creates New $US12mn Infra Fund—Brazil,” 

Business News Americas, March 11, 2008. 119 BNDES, Annual Report 2009, 2009, 106; Estruturadora Brasileira de Projetos (EBP) Web site, 

http://www.ebpbrasil.com (accessed September 28, 2011). 
3-22 

intermediaries for projects for which the private company has bid and won a project 

concession or PPP.120

BNDES undertakes these three functions for projects considered strategic by the 

government, and as a result, has provided significant technical expertise and financing for 

PAC-related projects. By 2009, total BNDES funds contracted or approved for 

PAC-related logistics infrastructure projects reached R$6.4 billion ($3.2 billion), or 

10 percent of total funds contracted or approved for the PAC.121 Between 2005 and 2008, 

BNDES provided R$199 billion ($108 billion) in loans, either directly to private 

companies or through financial intermediaries, for infrastructure projects in the electricity 

generation, telecommunications, sanitation, railways, highway transport, and ports 

sectors (table 3.4). BNDES investments in these infrastructure sectors are projected to 

increase by 37 percent to R$274 billion ($155 billion) during 2010–13.122 A description 

of projects in the road, rail, waterways, and ports sectors are shown in table 3.5. While 

many of these investments are not directly targeted at improving transportation efficiency 

for agricultural exports alone, many of the projects, such as the rail line between Alto 

Araguaia and Rondonópolis in Mato Grosso, will lower producers’ transportation costs to 

port and improve their reliability of supply. 

TABLE 3.4 BNDES investments in infrastructure projects, 2010–13

Sector

2005–08

(actual disbursements) 2010–13 % change

R$ billion

Electric energy 68 92 35

Telecommunications 66 67 2

Sanitation 22 39 77

Railways 16 29 81

Highway transports 23 33 44

Ports 5 14 180

 Total 200 274 37

Source: Borca and Guaresma, “Investment Perspectives in the Infrastructure Sector in 2010–13,” February 22, 2010.

 

 120 Demian Fiocca, “BNDES,” January 2006; government official, interview by USITC staff, Brasilia, 

Brazil, September 2, 2011. Brazilian law distinguishes between concessions and PPPs. Concessions are 

awarded for projects that are financially viable without any payment from public authorities to a private 

operator. In contrast, projects requiring a direct payment from public authorities to be finally viable are 

classified as PPPs. See Mourougane and Pisu, “Promoting Infrastructure Development in Brazil,” 2011, 14. 121 BNDES, Annual Report 2009, 2009, 51. 122 Borca and Guaresma, “Investment Perspectives in the Infrastructure Sector in 2010–13,” 

February 22, 2010, 5. 
3-23 

TABLE 3.5 Examples of BNDES investments in transport projects

Infrastructure sector Description

Road transport Loans to add 5,000 km of privatized highway concessions to the 

existing network of 15,000 km of highway concessions.

Rail Expansion of the ALL-operated rail line in Mato Grosso connecting the 

cities of Alto Araguaia and Rondonópolis, a distance of roughly 

260 km. The project was contracted in August 2009, in the amount of 

R$692 million ($345 million), and total investment (including other 

investment sources) was R$780 million ($388 million). 

Construction of the Transnordestina railway connecting a railway 

terminal in Eliseu Martins, Piauí to the ports of Pecém, Ceará and 

Suape, Pernambuco. The project was contracted in February 2009 in 

the amount of R$901 million ($449 million), and total investment was 

R$5.4 billion ($2.7 billion). 

High-speed train line to connect Campinas, São Paulo, to Rio de 

Janeiro, a distance of approximately 500 km. 

Ports $14 billion in loans to the ports sector for 2010–13, nearly triple that 

invested in 2005–08. Main investment factors include regulatory 

reforms undertaken in 2008 to allow private administration of ports and 

allow container companies to lease port terminals.

Source: BNDES, Annual Report 2009, 53 (accessed July 20, 2011); Borca and Guaresma, “Investment 

Perspectives in the Infrastructure Sector in 2010–13,” February 22, 2010, 5–6.

Other Government Policies Affecting Brazil’s Agricultural 

Production and Trade 

Overview 

Brazilian government policies have been instrumental in shaping the evolution of Brazil’s 

agricultural sector, as well as its current size and structure. Brazil’s agricultural policies 

comprise a wide array of instruments that provide support in areas such as farm prices, 

research and development, market and income assistance, rural credit and agricultural 

financing, rural insurance, and export financing, as well as special programs that target 

small family farms. By and large, these policies have served to support the international 

competitiveness of Brazil’s agricultural goods. In contrast, tax and environmental 

policies, as well as restrictions on foreign ownership of land, impose costs on agricultural 

producers and erode their competitiveness in export markets. 

Driven by considerations such as food security, inflation, and social inclusion, the goals 

and scope of Brazilian government policies have changed over time and been shaped by a 

general shift away from government intervention to a more market-driven approach that 

emphasizes global competition and private sector involvement (table 3.6).123 From the 

mid-1960s up until the 2000s, agricultural policies were focused on market intervention 

measures such as government purchases, price controls, high import duties, and export 

controls. But they are now more likely to be leveraged with private sector participation in 

measures such as preferential credit and project financing, as well as agricultural research 

 123 Chaddad and Jank, “The Evolution of Agricultural Policies,” 2006, 86–88; Chadha and Davenport, 

“Agricultural Policy Reform in the BRIC Countries,” February 2011, 7. 
3-24 

TABLE 3.6 Brazilian agricultural policy development, 1965–2005 

 Period and developments 

Item 1965–1985 1985–1995 1995–2005 2005 onward 

Macroeconomic 

environment 

 High inflation 

 Exchange rate 

 controls 

 Fast growth 

 Increased 

 government 

 expenditures 

 Stagflation 

 Debt crisis 

 Decreased 

 government 

 expenditures 

 Controlled inflation 

 Exchange rate 

 volatility 

 Modest growth 

 rate 

 Privatization 

 Lower inflation 

 Structural reforms 

 Stabilize 

 exchange rate 

 Lower interest 

 rates 

 Sustained growth 

 Infrastructure 

Policy goals  Food security  Deregulation 

 Liberalization 

 Land reform 

 Family farms 

 Social inclusion 

 Competitiveness 

 Sustainability 

 Globalization 

Price support  Increase in food 

 purchases and 

 storage, price 

 controls and 

 support 

 Decline in 

 intervention 

 Market deregulation 

 Targeted 

 intervention 

 Moderate, 

 selective 

 intervention 

Rural credit  Financed by 

 Treasury 

 Negative real

 interest rates 

 Decline in 

 governmental rural 

 credit supply and 

 subsidies 

 Family farms

 (PRONAF) 

 Specific 

 investment credit

 (BNDES) 

 Debt restructuring 

 Crop insurance 

 Private credit

 instruments 

 Special credit 

 lines for family 

 farms 

 Credit for 

 development of 

 cooperatives 

Trade policy  Import substitution 

 Export taxes 

 Unilateral trade 

 liberalization 

 Regional 

 integration 

 (Mercosul) 

 Elimination of 

 export taxes 

 Prosecution of 

 agricultural trade 

 barriers in WTO 

 Regional free 

 trade agreement 

 negotiations (FTAA, 

 EU–Mercosul) 

 Aggressive trade 

 policy 

 (negotiation, 

 litigation) 

 Address NTMs 

 (technical, 

 sanitary, social) 

 Pursue FTAs 

Research and extension  Increased 

 investment; 

 Embrapa created 

 Extension network 

 developed 

 Public investment 

 leveling 

 Public investment 

 declines 

 Boost funding 

 Increase PPPs 

 Intellectual 

 property 

 protection 

Family farms  Minimal support  Support begins 

 (Extraordinary 

 Ministry of Land 

 Reform) 

 Ministry of 

 Agrarian 

 Development 

 created 

 Land reform, 

 PRONAF

 programs 

 developed 

 Policy evaluation 

 and monitoring 

 Redirect 

 resources 

 Develop and 

 modernize 

 cooperatives 

Source: Adapted from Chaddad and Jank, “The Evolution of Agricultural Policies,” 2006, 86, table 1. 

Note: Mercosul refers to the Mercado Comum do Sul [Common Market of the South]. Full members are Argentina, 

Brazil, Paraguay, and Uruguay. FTAA refers to the proposed Free Trade Agreement of the Americas. 

 
3-25 

and development. 124 Government emphasis is now focused on the expansion and 

modernization of the Brazilian agricultural sector.125 In addition, newer policies address 

growing concerns about family farmers and environmental issues, both domestically and 

in export markets. 126 Specifically, some programs address the growing domestic and 

international concerns regarding deforestation and the environmental impact of Brazilian 

agricultural growth. 

Despite the broad scope of Brazilian government agricultural support programs, the level 

of support is relatively low compared with other major global agricultural exporters and 

markets, such as China, the European Union (EU-27), and the United States. In Brazil, 

the impact of government agricultural support as a factor of competition in global export 

markets has been overshadowed by other factors, such as natural endowments and 

climate. In addition, constraints such as infrastructure and capital are raising costs and are 

areas of concern for the development of future Brazilian agricultural policy. A summary 

of the impact of selected Brazilian government agricultural policies on export 

competitiveness is presented in table 3.7. 

Brazil’s Support for Agriculture Relative to Other Countries 

Each year, the Organisation for Economic Co-operation and Development (OECD) 

calculates the amount of support given by governments to agricultural producers and 

consumers in their respective countries. The measure of the support given to individual 

producers is referred to as the producer support estimate (PSE), and the measure of 

domestic support given to producers collectively is referred to as the general services 

support estimate (GSSE). 127 Each of these types of support affects a producer’s 

competitive position in export markets, typically by reducing their cost of production and 

delivery either directly or indirectly. 

The OECD PSE chiefly measures support based on input use (mainly preferential interest 

rates on working-capital loans) and commodity outputs (in Brazil, mainly preferential 

interest rates on marketing loans and market price supports). The PSE does not estimate 

impact on farm production or competitiveness in itself. However, because farmer 

revenues are increased or farm expenditures reduced by the amount of support measured 

in the PSE, it does represent policies that directly improve a producer’s position in export 

markets.128 The OECD measures Brazil’s PSE as relatively low compared with other 

major agricultural producers and exporters, both in absolute terms and as a share of 

agricultural output (table 3.8). In 2010, OECD measured Brazil’s PSE as totaling 

$7.1 billion (table 3.8). Brazil’s PSE represented about 4.5 percent of the value of 

agricultural production, compared with 7.0 percent in the United States, 17.4 percent in 

China, 19.8 percent in the EU-27, and 21.4 percent in Russia. Brazil’s PSE increased by 

68 percent during 2006–09 before falling 18 percent in 2010 (table 3.8). 

 124 Chaddad and Jank, “The Evolution of Agricultural Policies,” 2006, 86. 125 Matthey, Fabiosa, and Fuller, “Brazil: The Future of Modern Agriculture?” May 2004, 8–14. 126 Chadha and Davenport, “Agricultural Policy Reform in the BRIC Countries,” February 2011, 7, 10. 127 For a fuller explanation of PSE, GSSE, and other support estimates, see OECD, “Introduction to the 

OECD Producer Support Estimate,” n.d. 128 OECD, “Introduction to the OECD Producer Support Estimate,” n.d., 2, (accessed February 13, 

2012). 
3-26 

TABLE 3.7 Effects of selected Brazilian government agricultural policies on export competitiveness 

Policy Policy description Policy objective 

Impact on export 

competitiveness 

Rural credit and 

agricultural financing 

A wide variety of programs 

provide credit to farmers, 

cooperatives, and 

agribusinesses for working 

capital, marketing, and 

investment at below-market 

interest rates. 

The policies aim to improve 

productivity, increase output, 

and lower costs of 

investment, production and 

marketing. 

Brazilian exports of eligible 

products are more cost 

competitive in third-country 

markets. Examples include 

soybean exports to China and 

broiler exports to the Middle 

East. 

Market and income 

support 

A range of programs, including 

minimum price guarantees, 

federal government purchases, 

federal government loans, and 

special financial instruments, 

stabilize fluctuations in market 

prices and provide income 

support. 

The policies are intended to 

smooth the effects of price 

fluctuations on farm income 

and to alleviate regional food 

supply and demand 

imbalances. 

The impact on export 

competitiveness is minor 

compared with other policies, as 

they are directed mainly at 

domestic food supply issues. 

Also, the impact on exports has 

been tempered by recent high 

global commodity prices. 

Tax Brazil’s tax system is complex 

and multilayered. Taxes are 

applied at the federal, state, 

and municipal levels and 

include foreign trade taxes, 

taxes on assets and income, 

taxes on production and 

circulation, and social 

contribution taxes. 

Revenue generation. The Brazilian tax structure 

results in relatively high 

administrative costs and 

corporate tax rates compared 

with the United States, thus 

placing Brazilian exports at a 

competitive disadvantage. 

Rural insurance The rural insurance program 

subsidizes premiums farmers 

pay for agricultural risk 

insurance. 

The policy’s objective is to 

stabilize farm incomes, 

protect against unforeseen 

losses, and help farmers 

retain their production 

capacity. 

Brazilian export competitiveness 

is enhanced by stability of 

production capacity. However, 

the impact is minor owing to the 

limited scope of the program. 

Research and 

development 

Agricultural research and 

development is conducted by a 

range of federal, state, and 

academic agencies throughout 

Brazil. 

The policies assist in the 

development and utilization of 

new agricultural technologies 

in order to improve 

productivity, lower costs, and 

expand production areas and 

levels. 

The impact on the 

competitiveness of Brazilian 

agricultural exports likely has 

been substantial over the long 

run, owing to improvements in 

genetics and production 

processes which have improved 

productivity, lowered costs, and 

expanded the supply of export 

commodities, such as soybeans 

and meat. 

Environmental A variety of policies restrict 

and use and define methods of 

sustainable agricultural 

production. 

These policies aim to 

preserve water and forest 

resources and protect 

biodiversity. 

Environmental policies generally 

increase production costs and 

have a negative effect on export 

competitiveness. 

Export A number of policies have 

specific provisions for or may 

apply to exports as well as 

domestic production. These 

include export financing, tax 

rebates, and minimum price 

guarantees. 

Policies applied to agricultural 

exports generally are 

designed to facilitate the 

export process and lower 

costs. 

These policies lower the cost of 

Brazilian exports and enhance 

competitiveness in world 

markets. 

Foreign land ownership Legislation and decrees 

restrict the amount of land that 

can be owned by foreign 

entities. 

The restrictions were 

imposed in response to 

concerns about national 

sovereignty and food 

security. 

This policy restricts foreign 

investment in agricultural land 

that could lower production 

costs, thus negatively impacting 

the competitiveness of Brazilian 

exports. 

Source: Compiled by USITC staff based on data and information from BNDES, MAPA, MDA, Secretariat of Federal Revenue, and 

interviews. 
3-27 

The GSSE measures the value of services provided collectively to agricultural producers, 

including research and development, inspection services, market promotion, and general 

infrastructure development. As measured by the OECD, Brazil’s GSSE totaled 

$2.4 billion in 2010, again substantially less than most other major agricultural producers 

(table 3.8). This level fluctuated during 2006–10 from a low of $1.5 billion in 2007 to a 

peak of $2.4 billion in 2010. 

Selected Brazilian Government Programs Supporting Agriculture 

The principal Brazilian government agricultural support mechanisms include price 

support programs, rural credit programs, BNDES credit programs, tax policies, research 

and development activities, environmental programs, and insurance programs. Most of 

these mechanisms positively affect the competitiveness of Brazilian agricultural exports, 

but to varying degrees. Some of them, such as taxes and environmental policies, are so 

complex and burdensome that they damage competitiveness. Brazil’s agricultural 

agencies, policy objectives, and budgets are summarized in box 3.3. 

Price Support Programs 

The Brazilian government maintains various price support programs. Although the focus 

of these programs is on managing domestic food supply, they can enhance the export 

competitiveness of Brazilian producers by assuring minimum prices and covering 

transportation costs to ports. However, the impact of the various price support programs 

on the competitiveness of Brazilian exports is limited, given the policy’s domestic 

emphasis. Also, the effect on exports has been tempered in recent years by relatively high 

global commodity prices. Participation generally has been sporadic and has represented a 

small share of output for most commodities during 2006–10 (table 3.9). 

TABLE 3.8 OECD agricultural support estimates, by type and by selected countries, 2006–10 

Country 2006 2007 2008 2009 2010

 PSE (million $) 

China 54,717 57,957 24,282 103,742 147,028

EU 124,401 124,354 132,115 119,405 101,365

United States 30,496 33,174 30,477 31,423 25,551

Russia 9,028 12,759 20,813 16,225 15,521

Brazil 5,173 5,365 5,787 8,688 7,118

Australia 1,278 1,860 1,623 991 952

 PSE as a share of agricultural production (percent) 

Russia 17.2 18.2 21.9 22.1 21.4

EU 29.1 23.4 22.0 23.5 19.8

China 12.3 10.1 3.3 13.2 17.4

United States 11.2 10.0 8.8 10.1 7.0

Brazil 6.1 4.9 4.1 6.5 4.5

Australia 4.5 5.1 4.4 3.0 2.2

 GSSE (million $) 

United States 38,399 37,809 45,088 56,651 69,849

China 16,287 18,505 23,529 28,412 30,195

EU 15,081 15,375 18,532 13,678 13,319

Russia 2,359 2,867 4,676 5,044 2,773

Brazil 1,750 1,546 1,917 1,903 2,400

Australia 870 1,012 767 688 796

Source: OECD, Producer and Consumer Support Estimates database (accessed February 13, 2012). 
3-28 

BOX 3.3 Agricultural Agencies, Policy Objectives, and Budgets ________

 

Brazilian agricultural policy is administered mainly by the Ministry of Agriculture, Livestock, and Food Supply (MAPA) 

and the Ministry of Agrarian Development (MDA). In addition, the Brazilian Development Bank (BNDES) and the 

Central Bank of Brazil (BCB) administer rural credit programs funded through MAPA and MDA, as well as their own 

programs that affect agricultural operations. 

 

MAPA is the primary government agency responsible for implementing agricultural policy for most large-scale, 

commercial agricultural operations.a

 MAPA’s first strategic plan for assessing and implementing agricultural policy, 

created in 2006, considered the long-term outlook for Brazilian agriculture during 2006–15.b

 The plan established 

provisions for regular assessments, including multiyear plans (PPAs) and annual agriculture and livestock plans 

(PAPs) informed by 10-year agricultural projections that are updated annually.c

 The PPA indicates medium-term policy 

objectives for MAPA’s agricultural programs.d

 To date, there have been two PPAs, one for the period 2008–11 and 

another for 2012–15. The main objectives set forth in the PPA for 2008–11 included sustainable development through 

agribusiness, increasing nonfood and nonenergy agricultural production, supporting food security, and increasing 

biofuel.e

 PAPs specify MAPA’s priorities and funding for specific programs and commodities for each crop year. Major 

priorities during 2005–10 included production growth, rural insurance, and rural credit.f

 More recently, emphasis has 

been placed on the development of agroenergy, infrastructure, and logistics, as well as on sustainability. 

MAPA comprises several agencies that are responsible for administering various agricultural programs. The principal 

MAPA agencies that administer such programs include MAPA itself, the National Food Supply Company (CONAB), 

and the Brazilian Agricultural Research Corporation (Embrapa). MAPA primarily administers rural credit and risk 

insurance programs as well as a coffee program (FUNCAFÉ); CONAB administers price support and government 

purchase programs; and Embrapa conducts agricultural research. 

MDA was created to develop and administer policies that affect small-scale family farms.g

 Responding to concerns 

about the disproportionate share of support given to large-scale agribusiness, MDA has developed programs since 

2003 to specifically support small farms, provide them with resources and services, and address rural development 

and environmental concerns.h

 MDA’s main activities include land reform and the promotion of sustainable 

development for small-scale family farmers.i

 MDA comprises several agencies, including the Department of Family 

Farming (SFA) and the National Institute for Colonization and Land Reform (INCRA). The SFA administers programs 

that provide rural credit (PRONAF), infrastructure and municipal services, technical assistance, extension services, 

agricultural research, training, and market integration.j

 INCRA’s main responsibilities include land reform and the 

management of public lands.k

 MDA, like MAPA, develops PPAs and annual crop plans for family agriculture (PSAFs) 

that set forth policy objectives and priorities.l

 Recent MDA priorities include rural extension and technical assistance 

services, biofuels, agricultural zoning, rural microcredit and long-term credit, mechanization, debt restructuring, and 

sustainability.m 

In Brazil, the budgets for the primary agricultural agencies are established by the annual budget law (lei orçamentária).

The budgets for the primary agricultural agencies increased at a substantially higher rate than the total budget during 

the period. MAPA’s budget rose by 56.3 percent, to R$9.0 billion ($5.1 billion), while MDA’s budget increased by 

49.0 percent, to R$4.5 billion ($2.5 billion), during 2006–10. MAPA and MDA accounted for 0.8 percent of Brazil’s total 

budget in 2010, up from 0.5 percent in 2006. This growth reflects a renewed focus on agriculture by the Brazilian 

government. 

_____________ 

a MDA is responsible for smaller-scale and family farms. 

b

 MAPA, SAP, “Strategic Plan,” 2010, 5. 

c

 Ibid., 17. 

d

 Ibid., 45. 

e Ibid., 45–46. 

f MAPA, SMO, “Strategic Plan,” 2010, 30–31.

g

 Chaddad and Jank, “The Evolution of Agricultural Policies and Agribusiness Development in Brazil,” 2006, 88. h

 MDA, INCRA, A New Rural Brazil, June 2010, 9–10. i

 Presidência da República, Casa Civil, Subchefia para Assuntos Jurídicos, Decreto No. 7.255, de 4 de Agosto de 

2010, August 4, 2010. 

j

 MDA, SAF, “Missão” [Mission], accessed February 13, 2012, n.d. 

k

 MDA, INCRA, “Missão e Visão” [Mission and vision], February 13, 2012, n.d. l MDA, “Relatório de Avaliação do Plano Plurianual 2008–11” [Multiyear plan assessment report], 2009, 21, 30, 35, 

40, 48, 55, 63, 69, 74, 78. m MAPA, “Agricultural and Livestock Plan 2009/2010,” 2009.
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TABLE 3.9 CONAB price support programs for corn, rice, and wheat, 2006–10 

Commodity and program 2006 2007 2008 2009 2010

1,000 mt 

Corn 

 Acquisition (AGF) 2,224 273 150 588 103 

 PEP 3,088 1,183 599 4,875 11,229 

 PROP 2,258 0 531 0 0 

 PEPRO 100 3,753 0 1,296 875 

 Total, corn 7,670 5,210 1,280 6,759 12,207

Production 42,515 51,370 58,864 51,004 56,100 

Participation 18% 10% 2% 13% 22% 

Rice 

 Acquisition (AGF) (a) 62 0 0.3 0 

 PEP (a

) 158 0 0 143 

 PROP (a

) 0 0 0 0 

 Total, rice (a

) 220 0 0.3 143 

Production (a) 11,316 12,060 12,603 12,060

Participation (a

) 2% 0% 0% 1%

Wheat 

 Acquisition (AGF) (a) 0 236 21 49 

 PEP (a

) 0 426 1,395 567 

 PROP (a

) 0 0 0 0 

 Total, wheat (a) 0 662 1,417 616 

Production (a) 0 2,234 4,082 5,026 

Participation (a

) 0 30% 35% 12% 

Source: USDA, FAS, Brazil: Grain and Feed Annual Report, March 16, 2011, 21–22. 

Note: Totals may not add due to rounding. 

a

Not applicable. 

The various price support programs are administered mainly by the National Food Supply 

Company (CONAB). CONAB manages and executes all activities involving government 

stocks and policies related to programs that manage food supply and distribution.129 All 

the government programs that CONAB operates are based on a guaranteed minimum 

price policy (PGPM). Minimum price levels are determined for each program crop 

centrally by CONAB on an annual basis, but with approval of the Ministries of 

Agriculture and Treasury. 130 The price levels are set for different states. For export 

products, CONAB will often use world prices as a reference point to set the minimum 

price. For products primarily destined for the domestic market, the minimum price 

typically is calculated to cover variable costs of production. Minimum prices can be used 

as a tool to support production of particular products in particular regions as well. 

However, according to Brazilian government officials, they are not intended to be used to 

increase agricultural production overall, but rather to correct regional supply and demand 

imbalances by incentivizing production in areas with supply shortages as well as shifting 

the location of stocks from surplus to deficit areas.131 

 129 Government official, interview by USITC staff, Brasília, Brazil, August 24, 2011. 130 CONAB has published minimum prices for cotton, peanuts, rice, rubber, brazil nuts, beans, jute, 

cassava, corn, soybeans, sorghum, garlic, coffee, canola, carnauba, cashews, silk, oats, barley, wheat, 

triticale, sunflower, guaraná, milk, castor beans, and sisal. Government officials, interview by USITC staff, 

Brasilia, Brazil, August 24, 2011. 131 Government officials, interview by USITC staff, Brasilia, Brazil, August 24, 2011. 
3-30 

CONAB can purchase program commodities at the minimum price through a direct 

purchase or an options contract. The agency can only make purchases directly from 

producers or cooperatives.132 This is the method that is used to build public stocks. The 

government does have the ability to sell these stocks, either at market rates or at 

subsidized below-market rates, which can indirectly affect both the supply available for 

export and export prices.133

The PGPM includes two mechanisms to administer minimum prices. These mechanisms 

involve either direct government purchases at minimum prices under the Federal 

Government Acquisition Program (AGF), or loans under the Federal Government Loan 

Program (EGF). 134 The focus of the AGF has shifted from food security to income 

support for family farmers. The EGF provides short-term preferential credit to farmers 

and cooperatives, enabling them to withhold sales in anticipation of higher prices in the 

future. The participation rate varies significantly by category and year (table 3.9). 

Specific sales contract programs include the Premium for the Flow of Products Program 

(PEP), the Outflow of Product Value Program (VEP), the Producer Price Equalization 

Program (PEPRO), and the Private Sale Option Contract (PROP). Of the various price 

support programs, the PEP program is the most commonly used and has had the strongest 

effect on domestic marketing and export prices. The PEP program provides an 

equalization payment, determined by auction, to wholesalers that pay a minimum price to 

producers.135 The payment is meant to minimize the difference between the minimum 

price paid and the market price. Under the program, an agent pays a producer the 

minimum price and then ships the product to a buyer in a different region, paying for the 

transport costs. Products that are exported are eligible as well. The government then 

reimburses the buyer for the difference by auctioning premiums that are in place to 

compensate for the transportation costs. As a result, the program facilitates and 

incentivizes the efficient movement of product.136 Invoices are required to show proof of 

sale, and because bids in auction cannot be guaranteed, agreements between the agent 

and buyer are often conditional upon winning the auction. This program has been used 

extensively for the large volumes of corn being grown in Mato Grosso as a second crop 

after soybeans. Because of the extremely high transportation costs from the Center-West 

to the port of Santos outside of São Paulo—about R$180 ($107) per mt—farmers report 

that without the PEP program, they would not likely export corn.137 The VEP program is 

similar to the PEP; the only difference is that it applies to government-owned stocks.138

The PEPRO program provides an equalization payment directly to the farmer, like a 

deficiency payment,139 which represents the difference between the market price and the 

minimum guaranteed price.140 The PEPRO program is similar to PEP, although it uses 

 132 MAPA, SAP, Brazil Agricultural Policies, 2008, 14; government official, interview by USITC staff, 

Brasilia, Brazil, August 24, 2011. 133 Government officials, interview by USITC staff, Brasilia, August 24, 2011. 134 WTO, Trade Policy Review: Brazil, February 2, 2009, 105. 135 MAPA, CONAB, Regulamento para Oferta de Prêmio para Escoamento de Produto–PEP N. o

001/02. 136 Government officials, interviews by USITC staff, Brasília, Brazil, August 24, 2011. 137 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 138 WTO, Trade Policy Review: Brazil, February 2, 2009, 105. 139 OECD, Agricultural Policy Monitoring and Evaluation 2011, 2011, 217. 140 MAPA, CONAB, “Regulamento Para Operacionalização Da Oferta de Prêmio Equalizador Pago Ao 

Produtor Rural E/OU Sua Cooperativa–Pepro N. o

 001/06,” n.d. 
3-31 

different agents.141 Producers sell qualifying product into the market, and buyers bid for it 

in an exchange that CONAB facilitates. The government then provides the difference 

between the minimum price and the winning auction bids to the producer. This program 

is not as commonly used for corn as PEP, but has had substantial amounts of product 

move through it in some years.142

The PROP program provides a hedge to farmers, who sell to buyers under an option 

contract for future delivery. 143 The PROP program entails two auctions: the first to 

determine the premium paid, and the second to determine the actual exchange once the 

premium has been set.144 This program has not been widely used for grains in recent 

years.145

Although minimum price guarantee programs account for more than half of all 

government transfers to farmers, the effect, according to the OECD, is small. The OECD 

estimates that the minimum price guarantees increased the average price received by 

Brazilian farmers, including payments, during 2008–10 by slightly more than 1 percent 

above the prevailing border price.146

Government Credit Programs 

Credit programs historically have been an important component of Brazilian government 

agricultural support. In making capital available at below-market rates, rural and other 

credit programs have benefited the agricultural sector by helping to boost agricultural 

productivity and production. 147 This, in turn, enhances export competitiveness. The 

Brazilian government has reformed rural credit programs in recent years in order to 

increase the participation of private resources. Agricultural financing is provided mainly 

through private channels—only about 40 percent of the sector’s working capital and 

investment capital combined is provided at preferential rates through government rural 

credit programs. 148 The remainder is provided by input suppliers, purchasers, and 

commercial banks at market rates. Current domestic financial lending rates are 

substantially higher than those available in international capital markets, a situation that 

 141 Government official, interview by USITC staff, Brasília, Brazil, August 24, 2011. 142 USDA, FAS, Brazil: Grain and Feed Annual Report, March 16, 2011, 21. 143 OECD, Agricultural Policy Monitoring and Evaluation 2011, 2011, 217. 144 Government official, interview by USITC staff, Brasília, Brazil, August 24, 2011. 145 USDA, FAS, Brazil: Grain and Feed Annual Report, March 16, 2011, 21–22. 146 OECD, Agricultural Policy Monitoring and Evaluation 2011, 2011, 216. The nominal protection 

coefficient measures the ratio between the average price received by farmers, including payments, and the 

border price. 147 MAPA, SAP, Brazil Agricultural Policies, 2008, 6. 148 Ibid., 6–7. 
3-32 

places Brazilian agricultural producers at a competitive disadvantage in export 

markets.149

The agricultural credit programs administered by MAPA and MDA are channeled 

through financial institutions that comprise the National Rural Credit System (SCNR). 

These institutions include the Central Bank of Brazil (BCB), large commercial banks, and 

various regional and local banks and cooperatives that disburse credit funds. 150 In 

addition, BNDES provides additional credit under its own programs, as well as giving 

specific lines of credit to various agricultural sectors. 

Rural credit programs 

Brazilian rural credit programs provide working capital, investment credit, and marketing 

credit for commercial agriculture as well as credit for family farming. The total rural 

credit allocated increased from R$53.4 billion ($24.5 billion) in 2005/06 to 

R$101.5 ($57.4 billion) in 2009/10. Commercial agriculture received 86 percent 

(R$92.5 billion, or $52.3 billion) of total rural credit allocated in 2009/10. Working 

capital and marketing accounted for 72 percent of rural credit provided to commercial 

agriculture. The bulk of working capital and marketing credit provided to commercial 

agriculture through government programs is at controlled (below-market) interest rates. 

In 2009–10, two-thirds of such credit was provided at below-market rates. 

Working capital and investment credit is provided for production, processing, storage, 

and distribution of agricultural products. The preferential interest rates for working 

capital and marketing are 6.75 percent for most activities, although the interest rate under 

the PROGER Rural (medium-sized farms) and FUNCAFÉ programs are 6.25 percent and 

7.5 percent, respectively.151 Credit limits vary by product and program, but generally are 

limited to a maximum of R$650,000 ($388,000) annually for working capital and 

marketing, and R$1 million ($597,000) annually for investment per beneficiary.152

Rural credit for investment is provided to finance rural facility improvements, acquisition 

and maintenance of vehicles, irrigation and drainage, land clearing, reforestation, rural 

electricity and telephones, acquisition of breeding and working animals, and small 

 149 The SELIC rate represents the BCB’s overnight lending rate and is comparable to the U.S. federal 

funds rate. BCB, “Descrição da Taxa Selic” [Description of the SELIC rate] (accessed November 14, 2011). 

The Brazilian target SELIC rate was 9.75 percent as of March 13, 2012, compared with a U.S. prime rate of 

3.25 percent and an Eurozone prime rate of 1.00 percent. Commercial rates are often higher, but generally are 

based on these rates. Since January 2010, Brazil has also had the highest real interest rate of the 40 major 

economies in the world, estimated at 5.1 percent in the fourth quarter of 2011. The next closest country on 

the list was Hungary at 2.5 percent, and the United States’ real interest rate was estimated to be -3.4 percent. 

MercoPress, “Brazil has the highest real interest rate among 40 leading economies,” December 1, 2011. The 

Brazilian SELIC rate is taken from http://www.bcb.gov.br/?english (accessed March 13, 2012); U.S. and 

Eurozone prime rates, from http://online.wsj.com/mdc/public/page/2_3020-moneyrate.html (accessed 

March 13, 2012). 150 In 2011, there were 412 institutions participating in the SCNR. A list of these institutions is 

available at http://www.bcb.gov.br/htms/creditorural/2011/rel61.pdf. 151 PROGER Rural refers to Programa de Geração de Emprego e Renda (Program for Income and 

Employment Generation), which was replaced by PRONAMP, the National Program of Support for Mediumsized Farmers, in 2010–11. 152 Credit conditions and terms are given in BCB, Manual de Crédit Rural (accessed November 10, 

2011). 
3-33 

household land allotments. 153 Interest rates vary by program, ranging between 

6.75 percent and 9.5 percent per annum. This compares with the Brazilian SELIC interest 

rate of 9.75 percent per annum in March 2012.154 Commercial lending rates are higher 

and generally are based on the SELIC.155

A special line of rural credit for family farmers and agrarian reform settlers is offered 

through the Program for Strengthening of Family Agriculture (PRONAF).156 Under the 

PRONAF, family farmers are differentiated into five groups according to criteria that 

include the ratio of agricultural income to total income, the number of hired laborers, and 

annual family income. Lines of credit are provided under specific programs that cover a 

wide range of purposes and activities, such as working capital, investments in farm 

infrastructure, marketing, handicrafts, rural tourism, organic farming, environmental 

technologies, renewable energy, storage, and transportation. 157 Interest rates under 

PRONAF programs are considerably lower than those provided by other rural credit 

programs and range between 0.5 percent and 4.5 percent per annum.158

Rural credit is extended through several instruments.159 Banks that issue various credit 

instruments to farmers and agribusinesses may also issue agribusiness credit notes 

pegged to these instruments and trade them in financial markets. This provides for 

additional liquidity by tapping larger capital markets.160

The Brazilian government has restructured agricultural debt on several occasions.161 Debt 

renegotiation allows farmers to avoid default and possible bankruptcy, lower their costs, 

and continue their access to credit, all of which have a positive effect on export 

competitiveness. Most recently, the Brazilian government provided for the renegotiation 

of the terms of investment credit loans in 2010. The typical mechanisms used in rural 

debt restructuring include the transfer of debt to the treasury as active union debt 

(whereby the treasury assumes the loan default risk), the renegotiation of repayment 

terms on outstanding balances backed by government equalization payments, and 

outright debt forgiveness (mainly directed to small family farms). The 2010 debt 

restructuring was limited to 8 percent of the total value of the outstanding loans maturing 

on an annual basis. Producers could renegotiate two rural investment loans with maturity 

dates starting in 2009, and previously renegotiated loans were eligible for restructuring. 

The estimated value of agricultural debt eligible for renegotiation totaled R$25–30 billion 

($14–17 billion), compared with an estimated R$75–85 billion ($42–48 billion) of total 

 153 MAPA, SAP, Brazil Agricultural Policies, 2008, 7. 154 BCB, “Juros” [Interest rates], n.d. (accessed March 13, 2012). 155 See BCB, Relatório de Economia Bancária e Crédito 2010 [Bank savings and credit report], 2010. 156 MDA, SAF, “Programas: Crédito Rural,” n.d. (accessed July 13, 2011). 157 BCB, “FAQ: Programa Nacional de Fortalecimento da Agricultura Familiar–Pronaf,” 

September 2010. 158 For further details on the conditions and terms for rural credit under the PRONAF, see BCB, 

Manual de Crédito Rural. 159 These instruments include the Cédula Rural Pignoratícia (CRP), the Cédula Rural Hipotecária 

(CRH), the Cédula Rural Pignoratícia e Hipotecária (CRPH), and the Nota de Crédito Rural (NCR). BCB, 

“FAQ: Crédito Rural,” March 2010. Financing for agribusiness may be obtained through the Letra de Crédito 

do Agronegócio (LCA); the Certificado de Direitos Creditórios do Agronegócio (CDCA); and the Certificado 

de Recebíveis do Agronegócio (CRA). Herscovici et al., “Securitisation of Agribusiness Financial 

Instruments in Brazil,” 2008, 33. See acronyms list for English translations. 160 MAPA, Brazil Agricultural Policies, 2008, 9–11. 161 OECD, Agricultural Policy Monitoring and Evaluation 2011: OECD Countries and Emerging 

Economies, 2011, 218. 
3-34 

outstanding agricultural debt. 162 The OECD estimates that the value of Brazil’s 

agricultural debt rescheduling declined from R$2.4 billion ($1.1 billion) in 2006 to 

R$1.5 billion ($849 billion) in 2010.163

BNDES credit programs 

BNDES, the Brazilian Development Bank that finances investments in all of Brazil’s 

economic sectors, provides credit lines to agricultural producers and exporters in addition 

to the agricultural credit programs it administers on behalf of other agencies. In 2010, 

56 percent of BNDES’s disbursements were channeled through third-party financial 

institutions, including the BCB, large commercial banks, smaller local and regional 

banks, and local credit unions.164 Commercial banks assess the validity of the investment, 

the credit of the company, and the project. Although BNDES offers financing to some 

small firms and microenterprises, its loans generally require high ratios of equity to debt 

and detailed business plans, requirements which are difficult for smaller operations to 

meet.165

Two general credit lines with programs dedicated to agriculture include BNDES Finame 

Agricultural and BNDES Automatic. BNDES Finame Agricultural provides annual 

financing in excess of R$10 million, mainly for the acquisition of machinery and 

equipment. Financing is provided by BNDES up to 60 percent of the value of the 

investment at interest rates determined by a formula. 166 The loans have a maximum 

maturity of 90 months from the time of the application to BNDES. Under the program, 

suppliers of machinery and equipment must agree to pay BNDES 4 percent of the value 

of the transaction. The machinery and equipment must be on an approved list.167 BNDES 

Automatic provides financing to agricultural producers in amounts up to R$20 million 

($12 million) for micro, small, and medium-sized enterprises and up to R$10 million 

($6 million) for large enterprises. These limits are on an annual basis. The credit terms 

are similar to those for BNDES Finame Agricultural. 

BNDES also provides programs targeted to specific agricultural activities. For example, 

BNDES has programs targeted to modernize grain processing and storage, finance land 

acquisition and practices related to legal forest reserve requirements, help farmers recover 

 162 USDA, FAS, Brazil Agricultural Situation: Brazil Offers Agricultural Debt Renegotiation, 

August 5, 2010, 1. 163 OECD, Producer and Consumer Support Estimates database. 164 Government official, interview by USITC staff, Rio de Janeiro, Brazil, September 2, 2011. 165 Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 26–30, 2011. 166 BNDES, “Capacidade Produtiva: Demais Indústrias e Agropecuária” [Productive capacity: other 

industries and farming], n.d. (accessed November 14, 2011); Banco da Amazônia, “FINAME–Agricultural,” 

2011. The basic interest rate is determined by a combination of market rates and exchange rate adjustments. 

The maximum BNDES participation can be increased to 90 percent under certain circumstances. Besides the 

basic interest rate, BNDES receives an additional 0.5 percent per annum for a financial intermediation fee for 

loans to large enterprises, plus a spread fee of 1.3 percent per annum and a credit risk rate of up to 3.57 

percent per annum. There is an additional fee negotiated by other banks if they administer the loan. Large 

enterprises are those with annual gross operating revenues above R$60 million ($56 million). 167 BNDES, “Credenciamento de Equipamentos” [Equipment financing]. The agricultural sector 

accounted for 6 percent of total direct BNDES disbursements in 2010. BNDES, “Financial and Institutional 

Aspects,” March 2011, 38. Data do not include secondary market investments. This share grew from 

11 percent in 2001 to 17 percent in 2004 before declining to the level in 2010. 
3-35 

from natural disasters, and finance export preshipments and inventories for fruit and 

ethanol producers, among others, in response to the international financial crisis.168 

BNDES has identified priority agricultural sectors and directed support to companies 

within these sectors. In 2006, BNDES disbursed most of its R$2.1 billion ($963 million) 

of agricultural funds to the ethanol (R$1.0 billion, or $459 million) and meat 

(R$879 million, or $403 million) sectors.169 In 2007 BNDES directed resources to the 

expansion and modernization of the milk and meat (beef, pork, and poultry) sectors.170

Specific BNDES activities that year included providing capital to JBS S.A., a major meat 

producer, in order to acquire Swift and Company, a U.S. meat producer.171 BNDES also 

provided funding to Geneal for bovine genetics research and to Sadia S.A., a major 

frozen food and meat processor, for the implementation of an agribusiness complex.172 In 

2008, BNDES focused resources on the sugar cane, ethanol, meat, and soybean sectors.173

And in 2009, BNDES continued devoting resources to expand capacity and modernize 

the production of dairy, meat, grain, and ethanol.174

In addition to providing agricultural credit, BNDES has taken equity positions in 

agricultural entities through BNDES Participações S/A (BNDESPAR), its financing 

subsidiary. BNDES investments in the food and beverage sector accounted for 9 percent 

of its total equity investment portfolio as of December 31, 2010.175 For more information 

related to BNDES’s equity investments in agribusiness, see chapter 5. 

BNDES provides export financing through its subsidiary EXIM Brasil. EXIM Brasil 

offers export financing through two instruments, BNDES Exim Preshipment and BNDES 

Exim Postshipment. These programs provide export credits for approved products; most 

agricultural products are approved. 176 Interest rates vary by company size and are 

determined by formula, with remuneration rates charged by BNDES and accredited 

financial intermediaries. BNDES Exim Preshipment available to agricultural products 

 168 For more information related to these programs see BNDES, “Programa de Incentivo à 

Armazenagem para Empresas Cerealistas Nacionais—BNDES Cerealistas”; BNDES, “Programa BNDES de 

Apoio à Compensação Florestal—BNDES Compensação Florestal”; BNDES, “Programa BNDES 

Emergencial de Reconstrução dos Estados de Alagoas e Pernambuco—BNDES PER Alagoas e 

Pernambuco”; BNDES, “Programa BNDES de Revitalização de Empresas—BNDES Revitaliza”; BNDES, 

“Programa de Apoio ao Setor Sucroalcooleiro—PASS” (all accessed November 14, 2011). 169 BNDES, Annual Report 2006, n.d., 53. 170 BNDES, Annual Report 2007, n.d., 74. 171 Ibid., 84. 172 BNDES, Annual Report 2007, n.d., 84. Sadia S.A. was acquired by Perdigão, now called Brasil 

Foods, in 2009. 173 BNDES, Annual Report 2008, n.d., 120. 174 BNDES, Annual Report 2009, n.d., 148. 175 BNDES, “Financial and Institutional Aspects,” March, 2011, 34. 176 BNDES, “List of Financeable Products.” Excluded products are primarily listed in Mercosul 

Classification Nomenclature chapters 01 (Live animals), 10 (Cereals), 11 (Milled products), 12 (Oilseeds), 

and 14 (Vegetable products not elsewhere specified). A few additional products are listed in other chapters. 
3-36 

comprises four variants—preshipment, “agile” (short-term) preshipment, special 

preshipment, and preshipment anchor.177 

Tax Policy 

Brazil’s complex tax system imposes significant administrative burdens and economic 

costs on agricultural producers and exporters.178 Brazil’s corporate taxes, including taxes 

on income, assets, production, and wages as well state and local taxes, are also higher 

than those of some major agricultural export competitors, including the United States. 179

In surveys of Brazilian entrepreneurs on Brazil’s investment climate, the high tax burden 

is generally the top obstacle cited.180 Brazilian agribusinesses are not immune to this 

phenomenon and note that they could gain a significant cost advantage, as much as 10–

15 percent, if the tax system were simplified.181 These taxes also influence production 

locations within Brazil and distort the allocation of resources, further limiting the 

competitiveness of Brazilian agricultural products in export markets. 

Brazil maintains a three-tiered tax system, with taxes imposed at the federal, state, and 

municipal levels (table 3.10). 182 In certain instances, the Brazilian government has 

provided tax exemptions to industries or certain types of producers to boost their 

competitiveness. Cooperatives are exempt from some elements of COFINS and PIS 

taxes, as is animal feed, beef, pork, and poultry production.183 Revenues from exports 

generally are exempt from taxes, with the exception of the federal income tax.184 In 

addition, credits are given on taxes on inputs used to manufacture exported products. 

These credits may be used to offset other federal tax liabilities. In a general sense, tax 

exemptions for exported products discourage domestic sales in favor of exports, when 

prices in Brazil and overseas markets are similar. 

 

 177 WTO, Trade Policy Review: Brazil, February 2, 2009, 66. Preshipment provides financing for 

exporters up to 100 percent of the f.o.b. value for a term between 18–24 months. Short-term preshipment 

provides financing up to 30 percent of the f.o.b. value for a term of 6–12 months. Special preshipment 

provides additional financing in the event export values increase, and preshipment anchor is directed to 

indirect exports by micro, small, and medium-sized companies. BNDES Exim Postshipment provides 

refinancing up to 100 percent of the export value to foreign buyers of Brazilian exports by discounting credit 

instruments (promissory notes or bills of exchange) or assigning letters of credit. Refinancing terms are for 

up to 12 years. BNDES, “Post-shipment” (accessed November 14, 2011). 178 In 2011, the World Bank ranked Brazil 150th out of 183 countries analyzed for the ease and 

affordability of its tax system. The United States ranked 72nd. The World Bank calculated Brazil’s corporate 

tax rate in 2011 at 67.1 percent, compared with 46.7 percent for the United States. The assumptions and 

methodology used limit the possibility of comparisons among countries and within sectors, such as 

agriculture. World Bank, “Paying Taxes,” 2011; industry representatives, interviews by USITC staff, Mato 

Grosso, Paraná, and São Paulo, Brazil, August 22–September 2, 2011. 179 Including income tax, labor tax, and fees. 180 Blyde et al., Competitiveness and Growth in Brazil, March 2010, 48. 181 Industry representative, interview by USITC staff, São Paulo, Brazil, August 25, 2011. 182 For more information on the complex Brazilian tax system and other taxes not described here, see 

Brazil Secretariat of the Federal Revenue, “Taxes” (accessed September 13, 2011). 183 Brazilian Meat Monitor, June 23, 2011, 1–2; Brazilian Meat Monitor, “Tax Exemption Reaches 

Producers,” May 25, 2011. 184 UHY, Doing Business in Brazil 2010, 2010, 27. 
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TABLE 3.10 Selected Brazilian taxes 

Type Jurisdiction Rate Basis 

Assets and income 

 Income tax (IRPJ) Federal 15%; 10% 

surcharge on 

income in excess of 

R$240,000 per 

year or R$20,000 

per month 

Net profits 

 Rural land tax (ITR) Federal 0.3%–20% Property value 

 Transmission tax Inter Vivos (ITBI) Municipal 2% Property value 

Production and circulation 

 Industrialized Products Tax (IPI) Federal 0%–365.63% Aggregate value of goods 

 Tax on credit operations, exchange, and 

 insurance (IOF) 

Federal 6% Transaction value 

 Tax on the circulation of merchandise and 

 interstate and intermunicipal 

 transportation services and 

 communications (ICMS) 

State 7%–25%, 

depending on 

location and 

product 

Aggregate value of goods 

and services sold 

 Tax on services of any nature (ISS) Municipal 0.5%–10% Value of service 

Social contributions 

 Contribution to social security financing 

 (COFINS) 

Federal 3% or 7.6% Gross revenues 

 Contribution to the social integration 

 program and civil service asset 

 formation program (PIS/PASEP) 

Federal 0.65% or 1.65% 

(PIS); 

1% (PASEP) 

Gross revenues 

 Social contribution on net corporate 

 profits (CSLL) 

Federal 8% Net profits 

 Social security (INSS) Federal 26.8%–28.8% Payroll 

 Severance indemnity fund (FGTS) Federal 8% Payroll 

Source: RF, “Taxes;” UHY, Doing Business in Brazil 2010, 2010: Deloitte, “Overview of the Brazilian Tax System,” 

2010. 

Note: The COFINS and PIS tax rates vary depending on whether or not a firm elects to use a “non-cumulative” 

system for calculating tax liabilities that allows the use of credit mechanisms. 

The ICMS has a significant impact on agricultural supply chains in Brazil, increasing the 

prices of both products sold domestically and products that are exported. The ICMS is a 

state value-added tax charged at all stages of the supply chain, from the manufacturer to 

the end consumer. The tax is assessed on intrastate transactions as well as on all products 

transported for sale across state lines.185 The tax rate varies from state to state and ranges 

from 7 percent to 25 percent;186 some states impose different rates for different types of 

goods. Even though exports have been exempted from the ICMS since 1996, the tax still 

impacts the export supply chain because the tax is collected as a product moves across 

state lines. Moreover, since the firm receives only a tax credit if the product is exported 

and not cash directly, the ICMS increases costs for exporters.187 

The ICMS tax influences a firm’s decisions about the location of their production 

facilities as well as the type of products they export.188 While companies receive tax 

credits for the taxes paid when a product is exported, many firms are unable to use all of 

their credits to offset other taxes. Consequently, a secondary market has developed for 

 185 Deloitte, “Brazil Highlights,” 2011. 186 Ibid. 187 Goldsmith and Hirsch, “The Brazilian Soybean Complex,” 2006, 100. 188 Industry representative, interviews by USITC staff, São Paulo, Brazil, August 21–22, 2011. 
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them. But because the market for these credits is limited, companies may hold their 

credits for a long time—often 3–4 years. As a result, in order to avoid paying the ICMS 

up front, some processors move their facilities to the same state where they source their 

inputs. For example, Brazilian industry representatives attributed the shift of the center of 

the soybean processing industry from São Paulo to Mato Grosso, as well as a bias toward 

exporting whole soybeans, in large part to efforts to avoid the 12 percent ICMS on 

interstate shipping of soybeans.189 For more information on the impact of the ICMS on 

the soybean supply chain, see chapter 6. 

In addition to the ICMS, high tax rates are often a prevailing factor in deciding where 

Brazilian agribusinesses locate their operations. In 2011, JBS, a Brazilian meat processor 

and the largest global meat producer, closed a slaughter plant in São Paulo and a tannery 

in Mato Grosso do Sul and moved the operations to Ceará, Minas Gerais, and Goiás, 

where tax rates were more favorable.190 The firm projected that this move, as well as 

additional restructuring of other units, would enable it to raise output from its domestic 

operations by 5 percent through efficiency gains and enable the company to save 

approximately R$200 million ($119 million) annually by reducing its tax bill and 

overheads.191 

Research and Development 

A key element of Brazilian government assistance to the agricultural sector is research 

and development. Agricultural research and development is carried out mainly by the 

federal and state governments, as well as by academic institutions, and has been vital in 

modernizing and expanding Brazil’s agricultural sector. For example, technology 

developed by research and development in critical areas—e.g., breeding and genetics, 

crop and soil management—has enabled the Brazilian soybean sector to adapt to 

conditions and expand in various nontraditional agroecological zones, such as the 

cerrado.

192 In addition, it has enabled a wide range of other crops to be adapted to and 

grown in tropical conditions. Current research in areas such as integrated cropping, 

biotechnology, and geospatial mapping continues to benefit the Brazilian agricultural 

sector. These developments have increased productivity, expanded production area and 

output, and lowered costs, and thus have enhanced the competitiveness of Brazilian 

agricultural exports.193

The Brazilian Agricultural Research Corporation (Embrapa) is a leading component of 

Brazil’s agricultural research and development effort. Created as a public corporation, 

Embrapa was designed to focus on research and development in areas of national 

priority.194 In support of these goals, Embrapa established a national research network 

 189 Industry representatives, interview by USITC staff, São Paulo, Brazil, August 22, 2011. 190 Brazilian Meat Monitor, “JBS: Slaughterhouse Lays Off 1,300 to Save Tax,” September 30, 2011. 191 Reuters, “JBS to Shift Ops around Brazil,” August 30, 2011. 192 Lopes and Arcuri, “The Brazilian Agricultural Research and Development (ARD) System,” 

February 8–10, 2010, 2–4. 193 See the discussion on research and development in chapter 4 for more details on competitiveness. 194 Beintema, Avila, and Pardey, Agricultural R&D in Brazil, August 2001, 9–10. 
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with diverse, decentralized, and specialized activities. 195 In addition, Embrapa has 

established a competitive internal project assessment system made up of committees that 

use four-year projected funding levels and possible financial and industry productivity 

returns to assess research proposals. 196 Embrapa has also increasingly sought private 

partnerships. Embrapa’s budget has been increasing in recent years and reached 

approximately R$1.9 billion in 2010.197

In its 2008 long-term plan, Embrapa identified several priorities, including sustainability, 

agroenergy and biofuels, value-added products, and emerging technologies.198 It also set 

out long-term strategic guidelines that point to the development of partnerships, including 

private and international ones, to expand and diversify sources of funding, and to speed 

innovation and technology transfers. Specific areas of focus for future research include 

food security; bioenergy; sustainable use of degraded areas and the rain forest; integrated 

crop, livestock, and forest production; nanotechnology; biotechnology and biosecurity; 

and satellite monitoring.199

Embrapa conducts an annual social and economic impact assessment of its activities, 

which it publishes in its annual Balanço Social (social balance) report. In 2010, Embrapa 

reported that each real spent on agricultural research and development returned R$9.35 to 

Brazilian society, with a total social profit of R$18.2 billion ($10.9 billion). 200

Furthermore, according to Embrapa, the technologies it developed and transferred created 

93,442 new jobs in 2010.201 Embrapa also measures the economic impact of its activities 

on various elements affecting agricultural production, including productivity, costs, 

added value, the expansion of production area, and the value of production in expanded 

areas. In its 2010 assessment, Embrapa stated that the greatest impact has been on 

productivity increases, which it measured at R$12.1 billion ($6.8 billion) in 2010.202

According to Embrapa, this measure increased steadily during 2006–10, by 53 percent. 

Embrapa stated that its overall impact on two other elements—cost reduction and 

production in new areas—totaled about R$2.1 billion ($1.2 billion) and R$861 million 

 195 Embrapa has 46 research centers spread throughout the country. Each research center has either a 

product (e.g., soybeans or beef cattle) or thematic (e.g., cerrado or soils) focus area of research. Lopes and 

Arcuri, “The Brazilian Agricultural Research and Development (ARD) System,” February 8–10, 2010, 5–6; 

government officials, interview by USITC staff, Beltsville, MD, July 6, 2011; government officials, interview 

by USITC staff, Brasilia, Brazil, August 25, 2011. 196 Industry representatives, interviews by USITC staff, São Paulo, Brazil, August 22, 2011; industry 

representatives, interview by USITC staff, Beltsville, MD, July 6, 2011; Londrina, Brazil, August 31, 2011; 

government officials, interview by USITC staff, Brasilia, Brazil, August 25, 2011. 197 Using an average annual exchange rate of 1.68 reais per dollar, this equaled about $1.1 billion, 

compared with a budget of about $1.1 billion in fiscal year 2009 for the U.S. Department of Agriculture’s 

Agricultural Research Service. USDA, ARS, “About ARS,” November 7, 2011. 198 Embrapa, V Plano Diretor da Embrapa, 2008–23, April 1, 2008, 34–43. Specific areas of current 

research include tropical plants and animals (soybeans, fruits, cattle, and poultry); fibers and wood (cotton 

and eucalyptus); nitrogen fixation (soy, corn, sugar cane); biological control (integrated pest management); 

no-tillage practices; and sugar cane and ethanol. Embrapa, Embrapa and Brazilian Agriculture, April 28, 

2010, 11. 199 Embrapa, Embrapa and Brazilian Agriculture, April 28, 2010, 21, 23. 200 Embrapa, “Balanço Social, 2010,” 4, 6 (accessed November 14, 2011). 201 Embrapa, “Balanço Social, 2010,” 30 (accessed November 14, 2011). 202 Embrapa, “Balanço Social, 2010,” 13 (accessed November 14, 2011). 
3-40 

($487 million), respectively, in 2010, which has directly enhanced agricultural export 

competitiveness. 203

The importance and effectiveness of Embrapa has been cited by Brazilian agricultural 

producers. The Agriculture and Livestock Confederation of Brazil (CNA), a major farm 

group, considers the development of Embrapa to have been a major factor in the change 

in productive capacity and geographic distribution of Brazilian agriculture. 204

Agribusiness representatives consider Embrapa’s research to have had a positive effect 

on Brazil’s export competitiveness for soybeans and grain.205 However, some industry 

observers have claimed that Embrapa’s research is inadequately disseminated and that 

most of the benefit accrues to larger farming operations.206

In addition to Embrapa, there are several state, other government, nonprofit, and 

university agricultural research and development institutions. While these institutions 

receive less funding than Embrapa does, they are an important component of the 

Brazilian agricultural research and development system. 207

Environmental Policies 

Environmental issues have a long history in Brazil, and they are gaining in importance in 

response to rising domestic and international concerns regarding the impact of expanding 

agricultural production on the environment. The longstanding Proambiente program and 

the more recent low-carbon agriculture program (ABC) are two examples of the link that 

the government recognizes between agricultural production and the environment. 

However, Brazil’s most far-reaching policy in this domain is its forest code, which places 

restrictions on land use with the intention of regulating and limiting deforestation. 

Environmental restrictions and policies generally increase the cost of agricultural 

production, which reduces Brazilian exporters competitiveness in global markets. 

The Proambiente program was designed to assist rural households with the sustainable 

use of Amazon resources.208 Under the program, rural households are compensated for 

providing “environmental services” such as reducing deforestation, carbon sequestration, 

conserving soil and water, using fewer chemicals, lessening fire risk, and adopting 

renewable energy. 209 The ABC program was established to promote sustainable 

agricultural practices, such as the restoration of degraded farm and pasture land, organic 

and no-till farming, and integrated production systems, by providing investment credit at 

preferential rates to farmers. While compliance with government environmental policies 

typically increases costs for agricultural producers, these programs are intended to 

minimize those costs and reflect the government’s interest in promoting long-term 

sustainable agriculture. 

 203 Embrapa, “Balanço Social,” various issues 2006–2010; Embrapa, “Balanço Social, 2010,” 17, 22 

(all accessed November 14, 2011). 204 Industry officials, interview by USITC staff, Brasília, Brazil, August 25, 2011. 205 Industry officials, interview by USITC staff, São Paulo, Brazil, August 22, 2011. 206 Industry officials, interview by USITC staff, São Paulo, Brazil, August 25–26, 2011. 207 Beintama, Avila, and Fachini, “Brazil: New Developments in the Organization and Funding,” 

October 2010, 1–2. 208 MMA, “Proambiente: Histórico” [Proambiente: history], n.d. (accessed October 18, 2011). 209 MMA, “Proambiente: Um Novo Modelo de Desenvolimento Rural para a Amazônia” [Proambiente: 

A new model for rural development in the Amazon region], n.d., 7 (accessed October 18, 2011). 
3-41 

The environmental program with the longest history and greatest scope is the forest code. 

Various revisions of this code have established forest reserves, legal reserves, and 

permanent preservation areas, and have modified the definitions and coverage of these 

concepts.210 Under the current code, a certain percentage of a farm is required to be 

preserved as forest, but the exact figure varies depending on a farm’s location and size. 

Based on the requirements established by the 1965 law, the regulations require 80 percent 

of land defined as being in the Amazon to have forest cover. For land in the cerrado, the 

reserve requirement is 20–35 percent.211 For the Brazilian government, enforcement of 

the forest code is challenging because documenting land use across Brazil, particularly in 

remote regions, is difficult; as a result, enforcement of these requirements is generally 

perceived to be lax.212 

Revisions to the current code, part of a still-unsigned environmental law that the 

Brazilian Congress passed in December 2011, have caused considerable uncertainty for 

landowners. The most recent proposal introduces environmental adjustment programs to 

facilitate compliance, allows conditional suspension of fines for past deforestation 

infractions, allows the grandfathering of deforestation under past schemes, and changes 

provisions regarding permanent preservation areas and legal reserves. 213 Under the 

version of the new law passed by the Brazilian Senate, farmers would still have to 

allocate the same percentage of their land to forest reserve compared to agricultural 

production and will be required to replant as much as 50 percent of forested areas that 

were illegally cleared prior to 2008.214 However, different requirements would apply to 

certain “modules” depending on size and location. Reportedly, there is no standardization 

for the unit of land on which the regulations are based, and small family farms may be 

subject to different requirements than large ones.215

Despite the possibility of federal assistance in complying with the new regulations, if the 

government does enforce the new law effectively, the costs of compliance are likely to be 

high for affected landowners. Even when the new law is adopted, its technical details will 

take time to become clear. In the meantime, the uncertainty surrounding this issue is 

affecting land costs and expansion plans in the agricultural sector.216 

 210 CNA, Canal do Produtor, “Historical Evolution of the Brazilian Forest Code,” (accessed 

September 1, 2011). 211 For legal purposes in Brazil, the entire state of Mato Grosso is considered to be part of the Amazon 

region. However, when defined using biozones, there are transitional areas that fall between the legal 

Amazon and the real one. A future study by the Brazilian government will determine whether the cerrado

biozone in Mato Grosso is actually Amazon or savannah. Industry representative, interview by USITC staff, 

Mato Grosso, Brazil, August 31, 2011. 212 Industry representative, interview by USITC staff, São Paulo, Brazil, August 28, 2011; Forero and 

Eilperin, “Brazil’s Forest Policy Could Undermine Its Climate Goals,” Washington Post, December 18, 2011. 213 CNA, Canal do Produtor, “Historical Evolution of the Brazilian Forest Code” (accessed 

September 1, 2011). 214 Forero and Eilperin, “Brazil’s Forest Policy Could Undermine Its Climate Goals,” December 18, 

2011. 215 Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 28–31, 2011. 216 Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 20–25, 2011. 
3-42 

Insurance Programs 

The lack of adequate agricultural risk insurance for farmers in Brazil is a long-standing 

problem.217 The current system is handicapped by relatively low levels of government 

funding, inaccurate data on productivity and climate on which to base appropriate risk 

premiums, and risks that vary substantially because of the geographic size and the 

climatic and product diversity of the Brazilian agricultural market.218 

The Brazilian government subsidizes agricultural risk insurance for commercial farmers 

though MAPA’s Grant Program for Rural Insurance (PSR).219 The PSR is offered in 19 

states and regions and covers 41 products. Under the PSR, between 40 percent and 

70 percent of the premium for most products can be subsidized, depending on the 

product, up to a maximum of R$96,000 ($57,300); the premium subsidy for livestock is 

30 percent, with a maximum of R$32,000 ($19,100).220

Small and medium-sized farmers are provided credit risk insurance under the 

Agricultural Activity Insurance Program (PROAGRO).221 This program insures farmers 

against credit obligations rather than against revenue losses. Administered by the BCB 

through the various financial agents that channel rural credit, PROAGRO was amended 

to include PROAGRO Mais (PROAGRO Plus), which provides programs tailored to 

family farmers under the PRONAF. Coverage under PROAGRO and PROAGRO Plus is 

restricted to projects within the Agricultural Climate Risk Zone. This zone is defined 

using a set of parameters based on climate, location, soil, and crop cycles; developed by 

the Embrapa, these parameters are used to determine risk factors for crop losses. 222

Protection is limited under PROAGRO to R$150,000 ($89,500) per beneficiary per 

approved crop category per season.223 For livestock operations, the duration of protection 

begins with the acquisition of the covered debt until the sale of the livestock. Protection 

under PROAGRO Plus is limited to R$3,500 ($2,100) per participant. During the 2008–

09 crop year, the number of contracts totaled 68,200 under PROAGRO and 

585,200 under PROAGRO Plus, with an insured value of $1.4 billion under PROAGRO 

and $2.7 billion under PROAGRO Plus.224

Family farmers may obtain agricultural risk insurance under a special program 

administered by the MDA. The Family Agriculture Insurance program (SEAF) was 

established under the PROAGRO program and applies to family farmers that participate 

in PRONAF rural credit programs. 225 The SEAF generally guarantees 65 percent of 

expected net revenue of insured projects, and the government provides 75 percent of the 

premium. 

 217 Guanziroli and Basco, “Managing Agricultural Risk in Brazil,” May–August 2008, 2–3. 218 Tueller et al., “Betting the Farm?” 2009, 1. 219 MAPA, SAP, “Seguro Rural,” [Rural Insurance], n.d. (accessed September 14, 2011); MAPA, SAP, 

Programa de Subvençao ao Prêmio do Seguro Rural–PSR 2010 [Grant Program for Rural Insurance—PSR 

2010], n.d. (accessed September 14, 2011). 220 MAPA, SAP, “Seguro Rural,” [Rural Insurance], n.d. (accessed September 14, 2011). 221 MAPA, “Proagro,” n.d. (accessed September 14, 2011). 222 MAPA, “Zoneamento Agrícola de Risco Climático,” n.d. (accessed September 14, 2011). 223 BCB, Manual de Crédito Rural (accessed February 13, 2012). 224 Guimarães, Edilson, “Rural Insurance in Brasil,” March 15–17, 2010, 12. 225 MDA, SAF, “Programas–SEAF.” 
3-43 

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4-1 

CHAPTER 4 

Competitive Factors Affecting Brazil’s 

Agricultural Sector and Exports 

Overview 

In the last five years, Brazilian agricultural exports have become extremely cost 

competitive as the industry has taken advantage of the country’s considerable natural 

endowments. Sizeable land and water resources, as well as the presence of a variety of 

favorable climates, enable the production of a wide range of agricultural products in 

Brazil. In addition, broad, flat tracts of land with room for expansion lend themselves to 

mechanized farming on a large scale. Skilled farmers have capitalized on these natural 

resources, aided by sophisticated business strategies. As noted in chapter 3, supportive 

government policies, including government-backed preferential credit, product financing, 

and research networks, have assisted this development. Larger farms in particular have 

adopted profitable new technologies and modern production practices, including 

extensive use of genetically modified (GM) seed, high levels of fertilizer application, 

double-cropping, and the integration of livestock and crop production. 

Nonetheless, several important headwinds create a drag on Brazilian agriculture in 

general and exports in particular. These trends affect the cost of goods sold domestically 

and internationally. The appreciation of the real has made exports more costly overseas, 

particularly since 2008. Moreover, rising inflation is pushing up wages and other 

production costs across many economic sectors, including agriculture, and is offsetting 

one of Brazil’s key advantages: its low cost of farm-level production. Over a longer 

period, Brazilian infrastructure investment has consistently failed to keep up with demand 

for services, and this shortfall adds considerably to the final delivered cost of Brazilian 

agricultural goods. 

This chapter uses the analytical framework for competitive factors described in chapter 1 

to guide the description and analysis of the primary factors influencing competitive 

conditions in Brazil’s farm sector, breaking out the relevant factors into three 

categories—delivered cost, product differentiation, and reliability of supply. Two of the 

main factors that most broadly affect Brazilian competitiveness—Brazil’s government 

policies and transportation infrastructure—are discussed at length in chapter 3 of this 

report and therefore are not covered in this chapter. Another cross-cutting factor, foreign 

direct investment (FDI), is discussed briefly in box 4.1, as well as in chapter 5. 

Product differentiation decreases competition between the United States and Brazil for 

food and agricultural products, at least in the short run. The United States, while 

maintaining bulk exports, increasingly exports high-value, highly profitable agricultural 

products, such as processed foods and horticulture. By contrast, Brazil continues to 

primarily supply bulk agricultural commodities. Cheap, unskilled labor fueled Brazilian
4-2 

BOX 4.1 Foreign Direct Investment (FDI) in Brazil’s Agricultural Sector 

In the USITC’s analytical framework, described in chapter 1, FDI cuts across all three factor categories (delivered 

cost, product differentiation, and reliability of supply). In the agricultural and food processing sectors, FDI can lower 

costs by improving production efficiency, as foreign producers introduce new growing techniques or manufacturing 

processes. FDI may also sharpen product differentiation through upgrades in food quality, branding, access to global 

managerial skills, and agricultural practices. Finally, FDI can improve reliability of supply as foreign firms invest in 

distribution and storage facilities such as grain elevators and transportation equipment. 

At almost $1.9 billion, FDI in the Brazilian agricultural sector accounted for 3.5 percent of the $52.6 billion total FDI in 

Brazil in 2010. FDI in agriculture was split between the livestock and related services sector ($308 million) and the 

food and beverage sectors ($1.6 billion).a During 2006–10, FDI in Brazilian agriculture totaled $7.7 billion, averaging 

$1.7 billion per year. The 2006-10 total is somewhat less than the $8.2 billion total for 2001–04. 

 

Over the last several decades, FDI in the Brazilian food processing and retail sectors had a notable effect on these 

industries; foreign investment by large global firms displaced medium-sized and small domestic competitors, 

increasing industry concentration. Of the top 10 leading companies in the Brazilian food processing industry, six are 

multinational: Ambev (Belgium), Bunge Ltd. (United States), Cargill Inc. (United States), Unilever (United 

Kingdom/Netherlands), Nestlé S.A. (Switzerland), and ADM (United States).b

 The total market share of these foreign 

companies in the Brazilian food processing industry in 2009 was approximately 30 percent.c

_____________ 

a ISI Emerging Markets, CEIC database. b The other four, in 2010, were Brazilian companies Sadia, Brasil Foods, Copersucar S.A., and JBS S.A. (JBS). 

USDA, FAS, Brazil: Food Processing Ingredients, December 14, 2010, 4. In July 2011, Sadia and Brazilian rival 

Perdigão merged to form a new company called BRF Brasil Foods. c

 USDA, FAS, Brazil: Retail Food Sector, November 10, 2009. 

agriculture’s early growth, but as Brazil strives to move into valued-added production, 

the lack of skilled workers may hamper those efforts. 

Primary Factors Affecting Brazil’s Agricultural Sector 

Individual competitive factors can both enhance and weaken the competitiveness of 

Brazil’s agricultural exports. The competitive factors at work in Brazil’s agricultural 

sector and their general effects are depicted in figure 4.1. FDI and government policies 

have had overall positive effects on the sector and its exports, contributing to lower 

delivered costs, enabling firms to differentiate products, and stabilizing production. In 

contrast, poor transportation infrastructure clearly increases delivered costs and 

undermines the reliability of supply of Brazilian agricultural goods in export markets. 

Other factors are more directly tied to the specific categories of factors identified in the 

USITC competitiveness framework presented in chapter 1: delivered cost, product 

differentiation, and reliability of supply. Brazil’s natural endowments, research and 

development, agricultural industry structure, and land and labor costs have lowered 

delivered costs for producers. At the same time, other elements—the value of the 

Brazilian real; certain production problems, such as the lack of on-farm storage and 

technical extension services; and high tax rates—raise delivered costs for Brazilian 

producers in export markets. Factors that allow Brazilian producers to differentiate their 

products in export markets are favorable to Brazil’s competitiveness, while others, such 

as the constraints on available land for expansion, livestock diseases in Brazilian herds, 

and rising domestic demand, are likely to continue to keep some Brazilian supplies of 

agricultural products off international markets, reducing its competitiveness. 
4-3 

Natural endowments 

Industry structure 

On-farm storage 

Land costs 

Labor costs

Chemical input costs

Taxes

Financing

Exchange rate

Extension services 

Customer-oriented 

production

Environmentally and socially 

sustainable production

Rising domestic 

Livestock 

Land availa

agricultural e

Doub

Agricultural R&D 

Effect on Brazilian exports 

FIGURE 4.1 Competitive factors affecting Brazil’s agricultural exports have both positive and negative effectsSource: Compiled by USITC staff.
4-4 

Factors Affecting Delivered Cost 

Until recently, particularly in Center-West Brazil, low land and labor costs and few 

environmental restrictions contributed to low delivered costs for agricultural goods. Costs 

for Brazilian grains, soybeans, beef, and poultry, in particular, have typically been below 

those in the United States. The considerable transportation costs in Brazil, as noted in 

chapter 3, typically leveled the playing field for U.S. and Brazilian products competing in 

third-country markets. Brazil also suffers from an overall high cost of doing business, 

known generally as the “custo brasil” (box 4.2). Appreciation of the Brazilian real and 

rising inflation, particularly since 2008/09, are also pushing up a wide range of 

production costs, including land and labor. 1 In addition, changing environmental 

regulations that place conditions on land use create uncertainty for firms and help 

increase production costs. 

Natural Endowments 

Brazilian agriculture benefits from the country’s low-cost resource base. Weather 

patterns across much of the country permit intensive land use, including double-cropping 

in many regions, without irrigation. The presence of tropical, subtropical, and temperate 

regions enables the country to produce a wide range of agricultural products. Although 

there are some potential constraints, such as environmental restrictions, generally land 

has been available for expansion. Skilled Brazilian farmers have been able to capitalize 

on these strengths, particularly in the state of Mato Grosso, and rapidly boost production 

volumes. These natural endowments, particularly water availability, reduce the delivered 

cost of Brazilian agricultural production. 

Brazil’s mainly tropical climate brings both positives and negatives. Permeable soil and 

high temperatures permit any excessive rain during harvest to drain and/or evaporate 

more quickly than in most regions of the United States. This allows farmers to be back in 

the fields with tractors and harvesters shortly after a heavy rainfall.2

 However, the heat of 

the tropical climate is not conducive to high herd productivity for livestock, and more 

fungicide and pesticide use is often required in Brazil than in the United States, as there 

are no winter frosts to blunt fungus and insect population growth. 

Agricultural Research and Development 

Research and development was and remains a very significant driver of the 

competitiveness of the Brazilian agricultural sector. Brazil’s agricultural research system 

is one of the most developed and best funded in the developing world. As discussed in 

chapter 3, the Brazilian Agricultural Research Corporation (Embrapa) is credited for 

much of this research, particularly for its work on varieties of soybeans, corn, and cotton 

adapted to the acidic soils and climate of Brazil’s Center-West, North, and Northeast

 1

 Brazil’s inflationary pressures stemmed mainly from robust consumption and investment demand 

combined with a tight labor market. When consumer prices increased 5.9 percent in 2010, a rate above the 

Brazilian central bank’s target of 4.5 percent, the bank responded by initiating tight monetary policies in late 

2010 and early 2011. A broader discussion of Brazilian inflation is beyond the scope of this report. 2

 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 
4-5 

regions. Embrapa research is credited with increasing the productivity (measured in 

kilograms per hectare) of, among others, Brazilian cotton, rice, sugar cane, corn, wheat, 

and soybeans. Increased productivity reduces farmers’ overall delivered costs, as their 

variable costs are reduced and their fixed costs are spread across more units of output.3

Along with other benefits, advances in agricultural research and development have 

reduced delivered costs in specific Brazilian industries. The development of seeds for 

tropical conditions, techniques for the integrated management of diseases and pests, 

irrigation management, and the correction and fertilization of the soil were all studied at 

Embrapa with government funding. 4

 This resulted in a large increase in agricultural 

yields in the late 1990s and expanding production in the cerrado. In the beef industry, 

Embrapa has contributed to genetic enhancements to improve feed conversion and 

resistance to parasites, as well as improvements in forage crops for grazing, all of which 

have helped to reduce the time required for cattle to reach slaughter weight from 4 years 

 3

 Rada, Buccola, and Fuglie, “Brazil’s Rising Agricultural Productivity,” 2009, 5. 4

 Contini and Reifschneider, “Agribusiness: Innovation and Competitiveness in Brazil,” 2009, 92. 

BOX 4.2 The “Brazil Cost” in Brazilian Agriculture 

The Brazilian business climate is clouded by high port and land transport costs; extensive and inflexible labor laws; 

an uncertain regulatory environment, particularly in the areas of customs, environmental, and antitrust policies; and a 

complex tax system. Added to these are the high cost of investment and inefficiencies from production and 

distribution bottlenecks. These practical constraints on Brazil’s economic activity, often referred to as the custo brasil

or “Brazil cost,” can negatively affect the competitiveness of Brazilian firms in all industries. A study issued by the 

Brazilian Association of Machinery and Equipment Producers found that the custo brazil raises the price for eight 

agricultural and machinery products by 36 percent on average compared to the United States or Germany.a

 In 

addition, the bureaucratic red tape connected with opening a new business, the labor and software costs required to 

comply with government regulations and bureaucracy, and the high taxes embedded in the final consumer price of 

goods (upwards of 50 percent) are damaging to expansion in the agricultural sector.b

For producers in the agricultural sector, custo brasil takes many forms. Since financing a crop is very expensive, 

large trading companies engage in a form of barter with farmers in which they exchange fertilizers, pesticides, and 

other inputs for the farmers’ grains as payment after harvest, with any remaining money turned over to the farmer. 

There are about 30 different kinds of swaps, with an even higher number of contract terms. Doing business in this 

way is not always more efficient than cash transactions, but has become necessary in light of the high cost and/or 

unavailability of credit for most small producers. These types of inefficiencies result in high administrative costs that 

are passed along the production chain. In another example of custo brasil, food processors lose time in getting their 

new products to market because new SKUs for branded or processed products must be approved by the Brazilian 

government before they can be exported. Large Brazilian food processors have reportedly lost sales to other country 

suppliers because of the bureaucracy involved in such approvals.c

In another example of custo brasil, large, well-capitalized Brazilian agribusinesses that might invest in truck fleets to 

assure timely transport of their goods and control costs are not doing so. Agribusiness owners report that the 

complicated regulations in the trucking industry are a deterrent. Reportedly, small, independent truck operators often 

do not adhere to the full set of regulations. Large firms that enter into this line of business do not have the luxury of 

noncompliance (because of the business and public relations risks associated with it) and, in an industry with very 

low margins, the cost of compliance can be prohibitive.d

_____________ a

 James, “Business Basics in Brazil,” November 2011. 

b

 Industry representative, interview by USITC staff, Paraná, Brazil, August 30, 2011. c

 Industry representative, interview by USITC staff, São Paolo, Brazil, August 22, 2011. d

 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 
4-6 

to 2.5 years. 5

 Soybeans were developed with a shorter growing cycle, allowing the 

planting of a second crop on the same land. As a result, the production of corn as a 

second harvest after soybeans has optimized use of land and labor, reduced unit costs of 

machinery, and provided protective land cover for more of the year, reducing the longterm costs imposed by land degradation. These new technologies have increased 

production, productivity, and efficiency, often lowering unit costs without requiring 

increased spending on inputs.6

 Further information on Embrapa and Brazilian agricultural 

research and development is provided in chapter 3. 

Industry Structure 

Although small family farms in diffuse growing regions still exist, an increasing amount 

of Brazilian agricultural output is generated by large commercial farming operations. 

Farms in the Center-West region can be upwards of 10,000 hectares (ha) (24,700 acres), 

with some as large as 50,000 ha (124,000 acres). 7 In 2009, large-scale agriculture 

accounted for over three-quarters of total grain, oilseed, and meat production.8

 In the food 

and agriculture processing sector, a small number of large firms operate in many 

industries. In areas outside of the Center-West, small farms are normally defined as those 

of 30 ha (74 acres) or less, and large farms are those with more than 300 ha (740 acres). 

Brazilian agribusinesses are generally run by educated operators with extensive business 

and investment acumen. They use modern technology and production practices, have 

access to credit, and see their large-scale operations as integral to their competitiveness. 

The presence of large farms and agribusinesses in Brazil can be attributed to increased 

levels of investment, from both Brazilian and foreign sources. 9

 The nature of large, 

integrated production systems, particularly in the cerrado, requires considerable 

investment to prepare large land tracts, which consists of clearing the land and then 

adding nutrients to the soil to make the land productive. In addition, large-scale 

operations may be better able to cover the added costs of transporting goods over long 

distances to ports for export or to populated market centers within Brazil. 

Large-scale production allows firms to spread investments in land preparation and higher 

transport costs over more units. Greater size can reduce input costs by giving firms the 

ability to make high-volume purchases at a discount. Increasingly, Brazilian 

agribusinesses use their large volumes to negotiate reduced ocean freight prices out of 

Brazilian ports.10 Capital accumulation by these firms has allowed them to reinvest in 

operations by acquiring technology for further efficiencies and extending infrastructure, 

and has generated cash flow to reduce financing needs. 

Production Methods 

Large agribusinesses and agricultural cooperatives in Brazil have adopted modern, 

technologically sophisticated production practices to maximize profits. They also 

 5

 Industry representative, interview by USITC staff, Brasilia, Brazil, August 25, 2011. 6

 Contini and Reifschneider, “Agribusiness: Innovation and Competitiveness in Brazil,” 2009, 93. 7

 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 8

 Valdes, Lopes, and Lopes, “Brazil’s Changing Food Demand Challenges the Farm Sector,” 2009, 54. 9

 Doctor, “Brazil’s Rise and the Role of Big Business,” December 2010. 

10 Seatrade Asia, “Container Giants Locked in Negotiations with Brasil Foods,” November 27, 2009. 
4-7 

extensively use GM seed to reduce chemical input costs and boost yields (box 4.3). In 

addition to having the advantage of scale economies, many large farm operations are able 

to use land more intensively, employing double- (or triple-) cropping and sometimes 

integrating livestock production with existing crop operations.11 Like some producers in 

the United States, Brazilian farmers practice no-till agriculture to increase yields.12 In 

addition, a growing number of farms (including small family farms) are becoming 

mechanized, creating a boom in farm machinery sales in the last few years.13

The integration of both crop and livestock (typically cattle) production, while still 

relatively uncommon, has been gaining ground in the Center-West region. 14 In this 

integrated production model, farmers rotate their crops and pasture area by planting 

brachiaria grass for pasture along with corn.15 Both are fertilized, and when the corn is 

harvested, the remaining grass and certain crop residues, such as corn stover, serve as 

pasture for cattle.16 The following year, farmers spray to kill the remaining grass and then 

replant soybeans or corn on the same plot. Careful farm management is the key to using 

these new production methods, and farmers who have been successful enjoy better 

economic and financial status because of improved cash flow. The Ministry of 

Agriculture, Livestock, and Food Supply (MAPA) is encouraging these farming methods 

and offers specific credit lines for this type of farming.17

Modern production practices also contribute to sustainability over the longer term by 

preserving land so that it remains productive in the future. Practices that preserve soil 

nutrients contribute to increased crop yields. Integrated crops and livestock production 

promotes carbon retention in the soil, which makes it more productive. Double-cropping 

helps to maintain soil quality. The biological fixation of nitrogen as a substitute for 

fertilizer, particularly in soybean production, also reduces fertilizer costs. The no-till 

system, an alternative to traditional, intensive mechanical plowing, involves sowing 

directly through the straw left from the previous harvest; it requires less machinery and 

equipment, labor, and fossil fuel and favors biological pest, disease, and weed control. It 

also minimizes erosion and optimizes use of fertilizers. Some of these practices may 

increase production costs in the short term but result in longer-term gains. 

For some industries, such as beef, low market prices and cultural factors hamper 

improvements to traditional production practices. Cattle could be made more productive 

if fed grain, especially during dry seasons, or if cattle farmers invested in more 

productive forage seed. Because of abundant grazing land, research into improved forage 

seed is not a government priority.18 Moreover, in Brazil fertilizer is not typically added to 

 11 Industry representatives, interviews with USITC staff, Mato Grosso, Brazil, August 2011. 12 Contini and Reifschneider, “Agribusiness,” 2009, 87. 

13 Cabral, “Brazil’s Booming Agriculture Sector Eyes Global Markets,” May 25, 2010. 14 Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 28–September 1, 

2011; government officials, interview by USITC staff, Brasilia, Brazil, August 25, 2011. 15 It is far less common for ranchers to integrate crop production into their pasture because they often 

lack the capital to invest in machinery, as well as the farming skills and knowledge needed for crop 

production. Industry representative interview by USITC staff, Mato Grosso, Brazil, September 1, 2011. 16 Industry representative, interview by USITC staff, Brasilia, Brazil, August 25, 2011; industry 

representative, interview by USITC staff, Mato Grosso, Brazil, August 31, 2011. 17 Industry representative, interview by USITC staff, Brasília, Brazil, August 25, 2011. 18 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 
4-8 

BOX 4.3 Do Longer GM Seed Approval Times in the United States Disadvantage U.S. Firms? 

In most countries, in order to market seeds with GM traits, firms must first submit the traits to a governmental 

regulatory authority for evaluation and approval. The approval process often includes trials and tests conducted under 

various conditions, and can be lengthy, depending on a regulatory body’s resources and the expertise needed to 

conduct such trials. Considering the lengthy research and development process for GM seeds and the considerable 

financial investment it entails, it is in a firm’s interest that the regulatory approval process be as streamlined as 

possible, so the firm can move product quickly to market and begin recouping its investment.

For many years, the GM approval process in the United States was relatively streamlined and predictable. This was 

in contrast to many other countries that lacked clear procedures for GM approval, making the approval processes 

confused and disorganized. Companies that wanted to export products with GM traits to emerging markets with 

modernizing agricultural sectors, such as China and Brazil, were adversely affected. 

Now, separate developments in the United States and Brazil seem to have reversed the conditions. Reportedly, the 

Brazilian government has recognized the importance of having a timely and predictable system and, currently, the 

Brazilian approval process can take less than two years.a In contrast, in the past few years, the U.S. approval process 

has lengthened and can now take three to four years. Not only have the required environmental impact studies grown 

more complex as GM traits become more complex (e.g., multiple stacking), but some U.S. approvals have been 

challenged in U.S. courts. As a result, the U.S. approval process requires more detailed documentation from seed 

companies, and U.S. firms must devote more resources to addressing legal challenges. U.S. firms assert that 

unpredictability in the process stifles innovation and disproportionately disadvantages smaller companies, university 

departments, and smaller-market crops.b

The 2005 Brazilian Biosafety Law established the National Technical Commission on Biosafety (CTNBio) to evaluate 

the safety of GM traits for humans, animals, and the environment in Brazil, and the National Biosafety Council 

(CNBS) to approve GM traits in the broader Brazilian national interest.c Until two years ago, there was a virtual ban 

on new GM organisms (GMOs) by the Brazilian government because of environmental concerns.d In the past few 

years, however, approval times have declined from one to three years to as little as six months.e

 Approval of GM 

traits that have not been previously approved in other countries may take longer, as they are subject to studies 

performed in different regions of Brazil before approval is requested; this was the case before the recent 2011 

approval of GM seed for dry edible beans, the first GM trait fully developed in Brazil.f

 A March 2007 law requiring a 

simple majority vote of CTNBio members for approval, instead of the previous two-thirds majority required, has sped 

up the process.g

 To date, neither CTNBio nor the CNBS have refused a request for commercial release of a GM 

seed. The rapid approvals, which some have at least in part attributed to the disproportionate participation in CTNBio 

of politicians and lawyers rather than scientists, has drawn criticism from Brazilian environmental groups and even 

members of the CTNBio commission itself.h

In light of the lengthening U.S. approval process and the shortened approval process in Brazil, the regulations 

regarding GM approval in important third-country markets, such as China, may put U.S. GM seed developers at a 

competitive disadvantage relative to Brazil. Chinese regulations, for example, require that approval in the home 

country be completed before the application can begin in China, and Brazil’s speedy approval process may represent 

a competitive advantage for Brazilian firms in getting products to market in China. 

_____________ 

 a Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 31, 2011; industry 

representative, interview by USITC staff, St. Louis, MO, September 23, 2011. b

 Industry representative, interview by USITC staff, St. Louis, MO, September 23, 2011. c Lopez and Sampaio, “Approaching Biotechnology: Perspectives from Brazil and Argentina,” 2005. d Industry representatives, interviews by USITC staff, São Paulo, Brazil, August 23, 2011. 

 e Industry representative, interview by USITC staff, Paraná, Brazil, August 31, 2011. Other sources note that 

average approval times have been reduced to about 14 months. Industry representative, interview by USITC staff, St. 

Louis, MO, September 26, 2011. f Industry representatives, interviews by USITC staff, Paraná, Brazil, August 31, 2011. 

g USDA, FAS, Brazil: Biotechnology, July 17, 2007. h Industry representatives, interviews by USITC staff, São Paulo, Brazil, August 23, 2011; MSTBrazil, “CTNBio 

Approves Release of Transgenic Soya,” September 15, 2011. 
4-9 

forage because pasture grasses are not viewed as a crop. As a result there are many 

underutilized pasture areas, and cattle production suffers. Ideally, ranchers would 

recorrect soils (by reapplying seed, fertilizer, and lime) and improve 20 percent of their 

pasture per year, but currently most ranchers practice proper pasture management on only 

10 percent of their land annually.19 

Lack of on-farm storage 

Despite extensive use of modern production practices and the success of integration, 

inefficiencies remain on Brazilian farms, particularly limited storage.20 The lack of onfarm storage creates the need to deliver product soon after harvest or pay for storage 

elsewhere. Large supplies in the marketplace at harvest time drive commodity prices 

down and increase already high transportation costs as the demand for transport peaks.21 

Lack of agricultural extension services 

In many areas of Brazil, farmers suffer from a lack of agricultural extension services 

which provide state-funded technical assistance tailored for their region. 22 In certain 

areas, government-funded technical assistance is targeted at only very small farmers and 

is not consistent over time and may not be effective.23 In other areas, it may benefit large 

farmers more than small ones. Although Embrapa establishes some partnerships with 

firms and organizations in the agricultural community to disseminate its research and 

technology, it has been criticized for targeting large farms and agribusiness.24

Often farmer cooperatives or large trading companies fill in the gap by providing such 

services. Cooperatives give members technical assistance on agronomy, including plant 

genetics, soil science, and chemical applications. Small farmers outside the cooperative 

system often can receive technical assistance from the large trading companies they 

supply. However, this type of assistance can come at a cost to farmers, directly affecting 

the delivered cost of their goods.25

The lack of extension services inhibits adoption of new technologies and methods at the 

farm level, including some that are relatively low-cost but that yield significant results.26

For example, the traditional method of grazing beef cattle in Brazil does not include 

using “salt licks”—mineral salt provided in pastures that the cattle can lick for added 

nutrients. This is a common practice in the United States and is a relatively simple way to 

 19 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 31, 2011. 20 See chapter 3 for a description of Brazil’s lack of on-farm storage. 

21 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011; industry 

representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 22 Industry representative, interview by USITC staff, São Paulo, Brazil, August 25, 2011. 23 Industry representative, interview by USITC staff, Paraná, Brazil, August 29, 2011. 24 Industry representative, interview by USITC staff, São Paulo, Brazil, August 26, 2011; industry 

representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 25 Industry representative, interview by USITC staff, Paraná, Brazil, August 29, 2011. 26 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011; industry 

representative, interview by USITC staff, Brasília, Brazil, August 25, 2011. 
4-10 

increase the rate of weight gain in grass-fed cattle. Research has indicated that a 

50 percent increase in beef yields per hectare could be obtained using salt licks.27

Input Costs 

Land costs 

With its underdeveloped infrastructure, considerable distance from domestic and 

international markets, relatively poor soils, and environmental concerns, such as 

deforestation in the important Amazon and cerrado biomes, farming in the cerrado

presents a challenge. However, in its early development, cerrado land was inexpensive 

and could be made productive with targeted investments, such as adding lime to acidic 

soils. Over time, this land has become some of the most productive agricultural land in 

the world. For this reason, land values, particularly in Center-West states such as Mato 

Grosso, have risen considerably and are expected to continue to rise.28 

Agribusiness operators in the Center-West may own or lease their land or a combination 

of both. Current purchase prices in Mato Grosso for land for crops range from R$9,000 to 

R$36,000 ($5,520–$22,085, or 200–800 sacks) per ha depending on soil quality, current 

condition of the land (i.e., whether or not it has to be cleared), or if the land includes 

infrastructure, such as silos, warehouses, roads, or equipment.29 In addition, proximity to 

logistical services and infrastructure, such as rail or paved interstate roads, has a 

significant impact on land values. In Mato Grosso, land leases are common, and often are 

structured to take account of the expectation that land values are likely to continue to 

rise.30 Rental rates can range from R$360 to R$540 ($220–$330, or 8–12 sacks) per ha.31 

In addition to the cost of the land itself, rehabilitation of the soil is required in the 

Center-West cerrado to make the land productive. In 2011, land rehabilitation cost 

approximately $1,000 per ha. The application of agricultural lime to reduce soil acidity 

constitutes about 30 percent of that cost.32 Most of the lime is applied before agricultural 

production begins, but it must be reapplied periodically. Applications vary based on the 

farm, but before the first year, 4 metric tons (mt) of lime is applied per ha and 1 mt/ha is 

typically reapplied every 3–4 years.33

 27 Industry representative, interview by USITC staff, São Paulo, Brazil, August 26, 2011. 28 Government official, e-mail to USITC staff, November 4, 2011. 29 The average price of a hectare of land in Iowa, the heart of U.S. corn and soybean production, was 

$14,080 in 2011. USDA, NASS, “Land Values: 2011 Summary,” August 2011. In many agricultural areas of 

Brazil, particularly for the production of soybeans and corn, farmer revenues and payments for inputs (e.g., 

seeds and fertilizers), rents, and land purchases are often contracted in terms of 60-kg sacks of a given 

commodity rather than in reais. 30 Industry official, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. A typical 

arrangement is one in which a landowner without the capital or desire to invest in clearing and revitalizing a 

parcel for production may lease it to a neighbor for this purpose. In a case where rental land needs to be 

cleared, the lessee may enter into an agreement with the landowner to clear the land and in return use the land 

rent free for a few years, with increasing rental rates over the ensuing period. This type of arrangement could 

also be a rent-to-own agreement. 31 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 32 Agricultural lime is a relatively inexpensive input, and most of its cost is in transporting it to the 

region. 33 Industry official, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 
4-11 

In the last five years, U.S. average cropland values have risen rapidly in key growing 

states. Average values for both irrigated and non-irrigated land increased 20 percent 

during 2007–11 to $3,030 per acre ($7,480 per ha) in 2011. 34 Rising values can be 

attributed to tightening global supplies of food and agricultural products and rising prices 

for these supplies. Cropland values in Brazil during this period have been subject to the 

same global phenomena. But as recently as the early 2000s, in the early days of the 

cerrado expansion, land values in Center-West Brazil were far lower, averaging R$2,250 

($970 or 50 sacks) per ha.35 These low costs were a significant driver of low production 

costs for soybeans for many years. Now, rising land costs in key growing areas in Brazil, 

and the additional cost of rehabilitating unproductive land, are eroding Brazil’s once 

significant advantage of low land costs (box 4.4). 

Labor costs 

The agricultural sector is an important source of employment in Brazil. In 2011, 

20 percent of the Brazilian labor force was employed by agriculture, or about 

20.7 million people. This compares to only about 1 million people employed by 

production agriculture in the United States, or less than 1 percent of the total labor 

force.36 About 37 percent of Brazilian jobs are accounted for by the broader food and 

agricultural sector, which encompasses farming, food and agricultural processing, 

transport, and related services.37

Traditionally low labor costs were a competitive advantage for Brazilian agriculture, but 

recent rising inflation and strong economic growth have pushed up wages. In the last five 

years, the Brazilian minimum wage rose from approximately $70–$80 per month to over 

$350 per month (R$545) in 2011, and is likely to continue to rise.38 In 2011, inflationadjusted average real wages rose to $970 (R$1,579) per month, almost three times the 

monthly minimum wage.39

Labor scarcity is pushing up wages in Brazil, particularly for skilled workers, as the 

Brazilian agricultural sector is increasingly fueled by capital- and skilled labor-intensive 

technologies. Unskilled farm workers in Mato Grosso can earn $460–$920 per month 

(R$750–R$1,500). While skilled workers, such as harvester operators, earn about 

 34 In the U.S. Northern Plains and Corn Belt regions, the average cropland value increased 56 and 

39 percent, respectively, to $1,700 per acre ($4,200 per ha) and $4,920 per acre ($12,150 per ha) during 

2007-11. Average values for pastureland were much lower and rose only slightly during the same period, or 

7 percent, reaching $1,100 per acre ($2,720 per ha) in 2011. Pastureland in the Northern Plains and Corn Belt 

regions showed higher-than-average rates of growth, at 26 percent and 10 percent, respectively, to $553 per 

acre ($1,370 per ha) and $2,100 per acre ($5,190 per ha). USDA, NASS, “Land Values: 2011 Summary,” 

August 2011. 35 Industry official, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 36 CIA, The World Factbook: Brazil; CIA, The World Factbook: United States. Data for the U.S. 

agricultural sector include laborers in farming, forestry, and fisheries. 37 Industry representative, interview by USITC staff, Brasília, Brazil, August 25, 2011. 38 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011; Tavener, 

“Brazil Minimum Wage May Top R$800 by 2015,” September 27, 2011. This compares to a minimum wage 

in the United States of about $1,260 per month, at an hourly wage of $7.25 per hour. U.S. Department of 

Labor, Wage and Hour Division. 39 Lopez, “Brazil Labor Market Still Tight, Stoking Inflation,” July 19, 2011. 
4-12 

BOX 4.4 Legal Limits on Foreign Land Ownership in Brazil 

 

There is considerable foreign investment in Brazilian agricultural land, with official estimates ranging from 4 million to 

7 million hectares (10 million to 17 million acres).a Unofficial estimates are up to five times higher.b Major investments 

come from the EU-27, Japan, and China, among others.c

 In 2010, the Brazilian government put in place new legal 

limitations on foreign land ownership. In August 2010, the Brazilian attorney general issued an opinion on the 1971 

law that had limited the purchase of land by foreigners, and the new interpretation reinstated the restriction that had 

ended based on a previous opinion, which had been in force between 1994 and 2010.d

 The new interpretation limits 

the size of foreign purchases of farmland to 250–5,000 ha (620–12,350 acres), depending on the state; prohibits 

foreign ownership of more than 25 percent of the farmland of any given municipality; and requires justifications for its 

use from potential investors before approval is granted by the Agrarian Reform Ministry. 

Instead of direct land purchases, the Brazilian government encourages potential foreign investors, including those 

from China, to enter into production agreements with Brazilian agribusinesses and long-term land leases.e New 

legislation has been introduced in the Brazilian congress to ease some of the restrictions, but maintain the prohibition 

on foreign ownership of farms of more than 10,000 ha (24,700 acres). Many in the Brazilian agribusiness community 

are unhappy with any new restrictions, asserting that the economic impacts of the restrictions are significant for 

Brazil.f

 The uncertainty of the rules for foreign ownership has reportedly caused the price of agricultural land to drop 

by 14–19 percent in regions of Brazil with high levels of foreign participation, particularly Western Bahia and Paraná. 

In contrast, in Mato Grosso and Mato Grosso do Sul, where foreign investment has been lower, land values are rising 

due to large land investments by Brazilian farmers.g

_____________ 

 a Sauer, “Agrarian Structure,” April 6, 2011; Informa Economics, Brazilian Agribusiness Opportunities, April 13, 

2011. 

 b Correio Braziliense, “Mas de 4 Milhões de Hectares Estão sob Comando de Estrangeiros” [More than 4 Million 

Hectares are under Control of Foreigners], June 9, 2010. c Sauer, “Agrarian Structure,” April 6, 2011; Informa Economics, Brazilian Agribusiness Opportunities, April 13, 

2011. d

 Informa Economics, Brazilian Agribusiness Opportunities, June 15, 2011. e Industry representative, interview by USITC staff, Washington, DC, June 22, 2011. f

Brazilintl News, May 2011, part II. 

g Stewart, “Prices for Brazil’s Big Farms Slide,” November 3, 2011.

$1,410 (R$2,300) per month. 40 Salary packages include a wide range of additional 

benefits required by law, including medical and dental benefits, meals, and housing 

and/or transportation to the farm. Some operations also provide extensive training 

programs, and occasionally scholarship money for college. In Mato Grosso, most of the 

labor is drawn from surrounding areas and the workforce is sometimes unionized. 41

Because farms in the Center-West region are very large—a farm typically has 20,000 ha 

(49,000 acres) and 200 employees—these requirements add considerable costs to the 

farming operation. 

Complex and rigid labor laws in Brazil add significant administrative costs and 

operational inefficiencies to agribusiness firms’ operations.42 Compliance with labor laws 

is reported to be very expensive for Brazilian firms, and revisions to the complicated 

system of labor laws in the last five years have increased costs of compliance further. 43

“Social charges” (encargos sociais), which consist of payments employers are required by 

law to make to workers, such as unemployment funds or meal and housing stipends, can 

 40 Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 28, 2011. 41 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 42 Economist online, “Brazil’s Strange Labour Market: On Steroids?” March 10, 2011. 43 Economist online, “Brazil’s Strange Labour Market: On Steroids?” March 10, 2011; industry 

representative, interview by USITC staff, Mato Grosso, Brazil, August 31, 2011. 
4-13 

add up to 70 percent of an employee’s wage.44 Costs for laying off workers are high as 

well. Depending on the circumstances of the dismissal, some unionized employees could 

be entitled to withdraw the total deposits made by an employer to his unemployment 

compensation fund account, plus interest, monetary adjustment, and a 50 percent fine 

based on the total amount deposited. Additional payments by firms may also be 

required.45 

Brazilian labor laws also allow for a high level of state intervention in labor disputes. 

When JBS closed a slaughterhouse in São Paulo, resulting in job losses for 1,300 

workers, the Brazilian Ministry of Labor opened an investigation into possible illegalities 

related to the firings.46 Moreover, many labor regulations were originally intended for 

urban settings but are now being applied to rural and farm work. For example, because 

farm workers are required to have 11 hours of continuous rest between shifts, contract 

workers must be brought in during the harvest time to cover those rest periods. This 

regulation also appears to be problematic for herders that do not work consistent shifts.47

Overall, Brazilian labor laws contribute to low labor productivity and high turnover, and 

leave employers little incentive to train workers. As a result, Brazilian agricultural 

operators continue to look for ways to decrease labor costs, including investments in 

mechanization. 

Workers with technical and managerial skills are in short supply in the Brazilian 

agricultural sector. There are also regional differences in availability of skilled and 

unskilled labor. In response, the Brazilian government has been funding new agricultural 

training programs, with farm management often a priority.48 For some firms, the acute 

lack of skilled labor in some regions is affecting their expansion plans, forcing them to 

increase production abroad. Reportedly, in some agricultural industries, American, 

Chinese, and European managers and engineers are being brought to Brazil to fill highly 

technical positions.49

On a positive note for the future of the agricultural sector, Brazilian farm families are not 

facing the succession problems that often occur in other major producing countries when 

the younger generation leaves farming for other, more lucrative pursuits, often in urban 

centers. In Brazil, children of farmers are becoming better educated, but they typically 

still want to work on the farms.50 Many of these young farmers are pursuing business 

degrees even while they run farm operations; for example, in Mato Grosso, some fly to 

the state capital, Cuiabá, on the weekends for classes in business management, 

economics, and accounting. 51 Some of Brazil’s most prestigious graduate schools 

offering MBAs have seen a surge in demand from Brazil’s rural population, and they are 

now offering programs across the interior. A prominent graduate school, São Paulo’s 

 44 James, “Business Basics in Brazil,” November 2011. 45 Ibid. 

46 Brazilian Meat Monitor, “JBS: Slaughterhouse Lays Off 1,300 to Save Tax,” September 30, 2011. 47 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 31, 2011. 48 For example, the University of São Paulo’s agricultural school, the Escola Superior de Agricultura 

Luiz de Queiroz (ESALQ), will begin offering a management degree in 2013. Industry representative, 

interview by USITC staff, São Paulo, Brazil, August 23, 2011. 49 Industry representative, interview by USITC staff, São Paulo, Brazil, August 22, 2011. 50 Industry representative, interview by USITC staff, São Paulo, Brazil, August 26, 2011. 51 Ewing, “Brazil Farmers Return to School to Keep Their Edge,” September 23, 2011. 
4-14 

Getulio Vargas Foundation, has expanded agricultural economics and MBA programs 

into 20 satellite courses across the Brazilian farm belt.52 

Despite rigid labor laws that promote inefficiency and raise overall administrative costs, 

Brazilian labor costs are still lower than those in the United States, although inflation and 

a dearth of skilled workers are pushing up the wage rate. The lack of skilled workers will 

likely hamper the Brazilian agricultural sector’s efforts to increase exports of highly 

processed, value-added food and agricultural products.53 

Chemical inputs 

Brazilian agriculture is heavily dependent on chemical inputs such as fertilizers, 

agrochemicals, and pesticides. For fertilizers on most farmland, the “top dressing” 

requires a combination of nitrogen, phosphorus, and potassium (NPK). To obtain the 

same yields, 500 kilograms (kg) of NPK is required in Brazil per hectare, versus 100 kg 

in Argentina and 100–200 kg in the United States.54 Currently, Brazil imports more than 

70 percent of its fertilizer and 80 percent of its pesticides. The additional transport costs 

inside Brazil make these chemical costs about 8–10 percent higher than in neighboring 

Argentina.55 

Although Brazil produces fertilizer and is rich in some of the necessary mineral 

resources, the Brazilian agricultural sector’s strong demand growth for fertilizer has 

rapidly outpaced its domestic supplies, increasing reliance on imports. Potassium is not 

mined in Brazil, while Brazil’s phosphorus is of poor quality. Brazil is the world’s 

second-largest importer of phosphate fertilizers after India and the fourth-largest potashimporting country after the United States, China, and India.56 Prices for fertilizer are high 

in Brazil, owing to the limited number of large domestic producers and volatility in the 

price of imports owing to fluctuating global supplies.57 High fertilizer costs also reflect 

Brazil’s weaknesses in infrastructure for handling and shipping bulk commodities. 

The Brazilian government has expressed an intent to make Brazil self-sufficient in 

fertilizers by 2020, through investments of R$11 billion in the sector.58 Observers note 

that it is unlikely that increased domestic production of fertilizer will eliminate the need 

for imports, because domestic demand will continue to grow as crop expansion continues. 

Moreover, natural resource and extraction constraints will limit the expansion of fertilizer 

production. 59 Certain imports, such as nitrogen and phosphate, could decline with 

increased domestic production, although imports of potassium are likely to remain at 

about 80 percent of consumption.60 Price volatility in the global fertilizer market may 

also decrease as planned production expansions outside of Brazil come on line.61 In light 

of these developments, as Brazilian producers of export-oriented food and agricultural 

 52 Ibid. 

53 Cabral, “Brazil’s Booming Agriculture Sector Eyes Global Markets,” May 25, 2010. 54 Industry representative, interview by USITC staff, São Paulo, Brazil, August 26, 2011. 55 Ibid. 

56 The Fertilizer Institute, “Statistics FAQs,” n.d. 

57 MoA, Livestock and Food Supply, SAP, Brazil Agricultural Policies, 2008, 31. 58 Informa Economics, “Production of Fertilizers in Brazil Is Still Incipient,” April 27, 2011. 59 Industry representatives, interview by USITC staff, Mato Grosso, Brazil, September 1, 2011. 60 Gomes, “Brazil to Slash Fertilizer Imports in 5 Years—Industry,” July 12, 2011. 61 Corn and Soybean Digest, “Brazil Likely to Need Fertilizer Imports,” July 15, 2010. 
4-15 

products continue to seek higher productivity through increased yields, the cost of 

fertilizer will continue to be a significant factor for Brazilian agriculture. 

Financing 

Financing is a critical factor in the expansion of the Brazilian agricultural sector. 

Agricultural producers need credit to finance their daily operations prior to harvest and 

sale, and for investment in capital goods and assets. In Brazil, financing for agriculture is 

available from several sources: government agricultural credit disbursed through the 

National System of Rural Credit (SNCR); agricultural input suppliers, processors, and 

exporters; commercial banks; or other government agencies. In Brazil, interest rates are 

higher than in the United States, and credit availability is limited. Total credit granted by 

the financial system to the private sector in 2009 was less than 30 percent of gross 

domestic product (GDP), which is one of the lowest levels of credit availability anywhere 

in the world. 62 Further information on credit provided by the Brazilian government, 

including BNDES, is provided in chapter 3. 

The prevailing commercial rate offered to farmers by Brazilian banks was 15 percent in 

2011, while smaller operations were commonly offered a 20 percent rate from local 

banks, typically with minimum fees of 1–2 percent of the loan value. 63 This is 

considerably higher than commercial farm loan rates in the United States, which were 

generally lower than 5 percent in 2011.64 In light of these constraints, farmers often 

secure financing through their business partners. During the past 10 years, input supply 

companies and trading companies provided the bulk of production financing for farmers, 

a critical factor in the expansion of the agricultural sector. In the case of grain and 

soybean production, much of this financing was provided through the barter system by 

trading in “sacks” of goods (box 4.5). 

Large Brazilian agribusinesses have more options for financing than small farmers. 

Because interest rates are lower abroad, large multinationals may have access to 

inexpensive financing. Within Brazil, a larger firm with a strong balance sheet and 

sufficient collateral may qualify for a one-year loan for operational lines of credit at 

interest rates between 7–8 percent, while investment loans may run 10–12 percent for 

investing in land development or other capital projects. 65 However, rates vary 

significantly depending on the length of the project, the project’s possible returns, and the 

company itself. For example, a multinational with a strong balance sheet looking to 

finance an investment with a 5–7 year loan from sources both within Brazil and abroad 

may have access to the London Interbank Offered Rate (Libor) plus 4 percent.66 

 

 62 Valdes, Lopes, and Lopes, “Brazil’s Changing Food Demand Challenges the Farm Sector,” 2009. 63 Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 2011. 64 Henderson and Akers, “Agricultural Finance Databook,” January 2011. 65 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 66 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011. During 2006–

10, the 12-month Libor ranged from a high of 5.8 percent in June 2006 to a low of 0.7 percent in July 2011. 

“Historical LIBOR rate information,” FedPrimeRate.com. 
4-16 

BOX 4.5 In Brazil, Farmers Can Use Sacks of Soybeans and Corn in Lieu of Cash Payments 

In many agricultural areas of Brazil, particularly those producing soybeans and corn, farmer payments for inputs (e.g., 

seeds and fertilizers), rents, and land purchases are often contracted in 60 kg sacks rather than in reais.

a

 This system 

of bartering has a long history in Brazil, going back many years before the country’s economic stabilization in the 

early 1990s. 

Global price discovery for soybeans and corn occurs in U.S. dollars at the Chicago Board of Trade, with Brazilian 

spot markets and sales contracts adjusted for local conditions such as transportation costs. While Brazilian farmers 

can be paid in cash for their harvest, the price they receive in reais is directly related to Chicago prices.b 

Setting prices in sacks rather than reais is beneficial both for farmers and the parties that buy and sell from them. 

Using sacks as a proxy for U.S. dollars is a hedge against inflation. Price variances for production inputs are largely 

disregarded, and if the price of a sack declines, farmers lose revenue but also lower their overall cost. They can focus 

primarily on increasing harvest yields to boost profits. Moreover, paying in soybeans give farmers better cash flow 

and more liquidity, because they receive seeds and fertilizers months before final payments are due.c

According to an industry representative, traders such as ADM and Bunge that provide inputs to farmers in exchange 

for sacks of soybeans or corn are willing to continue this system because it provides guaranteed crop volumes for 

crushing or export. Bankers who loan to farmers prefer payments in U.S. dollars when they acquire international 

capital denominated in that currency, but they are often willing to set repayment terms in sacks as a second-best 

option because soybean prices are strongly correlated to Chicago prices. Most traders and bankers also have access 

to sophisticated international hedging instruments to lower the price risks associated with bartering.d

 

_____________ a

 Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August–September, 2011. b Thompson, “Behind the Numbers,” October 1, 2003. Broadly speaking, soybeans are a proxy for U.S. dollars. 

Historically, this was important in Brazil, where for a considerable period the local currency continually lost value 

against the U.S. dollar. Over time, Brazilian farmers grew accustomed to discussing finances not in reais but in the 

number of sacks paid for a combine or fertilizer. Industry representatives, interviews by USITC staff, Mato Grosso, 

Brazil, August–September, 2011. c Thompson, “Behind the Numbers,” October 1, 2003. The effect of the barter system is to lower financing costs for 

farmers and minimize input price volatility, thereby lowering their overall cost of production. d

 Industry representative, interview by USITC staff, Mato Grosso, Brazil, September 1, 2011. 

Brazilian agricultural producers generally pay more for credit than their U.S. 

counterparts; higher credit costs limit their ability to expand production and make exports 

less competitive. However, smaller operations are more affected by this phenomenon 

than large agribusinesses, which have more access to lower international rates of credit 

and large government-funded credit sources. 

Exchange Rate 

Exchange rates have an important effect on a country’s export competitiveness, as they 

affect not only the price of final traded goods but also the cost of inputs used in 

production, particularly when many of those inputs are imported. A country’s exports 

tend to rise with depreciation and fall with appreciation. 

In recent years, Brazil’s real has appreciated substantially against the U.S. dollar.67 From 

October 2002 to July 2011, the Brazilian real appreciated in nominal terms by 

approximately 60 percent. More recently, the real appreciated by 35 percent between 

 67 Interviews conducted in Brazil noted that “the exchange rate is a huge problem because many 

important third-country markets are pegged to the dollar.” Industry representative, interviews by USITC staff, 

São Paulo, Brazil, August 23, 2011. 
4-17 

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Appreciation Brazil's Real Depreciation

U.S. dollars per Brazilian real

December 2008 and July 2011 (figure 4.2). When comparing the relative cost of goods in 

two countries, the nominal bilateral exchange rate is important; but changes in relative 

prices must also be taken into consideration, particularly if countries experience different 

rates of inflation. Considering relative prices of the United States and Brazil, the real

appreciated by 33 percent in real terms between October 2008 and July 2011. This 

suggests a loss of Brazilian export competitiveness during that period. Thus, despite 

strong demand for Brazilian exports, the country’s trade surplus with the world declined 

from $45 billion in 2005 to $30 billion in 2011.68 Although the Brazilian real has more 

recently depreciated against the U.S. dollar (by 14 percent between July 2011 and 

December 2011), at the end of 2011, its value was still 22 percent higher than in 2006. 

Exchange rate movements, commodity prices, and exports 

Most of Brazil’s export transactions are conducted in U.S. dollars, so movements in the 

U.S.-Brazil bilateral exchange rate affect Brazil’s competitiveness. The prices of Brazil’s 

commodity exports have changed significantly in the last five years and the appreciation 

of the Brazilian real against the U.S. dollar reduced Brazilian export competitiveness 

particularly since late 2008.69 For example, because soybeans are traded globally and 

Brazil’s export price is tied to prices on the Chicago Board of Trade (CBOT), profit 

margins for Brazilian exporters decline when the real appreciates. The appreciation of the 

real causes the cost of domestically-produced inputs to increase relative to other global 

producers and causes the revenue received in reais to decline relative to the price in 

dollars. 70 The price in dollars of soybeans, one of Brazil’s main exports, increased 

 68 GTIS, Global Trade Atlas database (accessed February 15, 2012). 69 Industry representatives, interviews by USITC staff, São Paulo, Brazil, August 23, 2011. 70 The cost of imported inputs decline as the real appreciates, but they typically only account for a 

small percentage of overall costs in Brazil. 

FIGURE 4.2 The U.S.-Brazil nominal exchange rate, January 2002–November 2011, 

shows the real’s appreciation 

Source: U.S. Board of Governors, FRS, "Statistics and Historical Data" (accessed December 22, 2011). 
4-18 

67 percent between 2006 and 2010, but the price in reais increased by only 36 percent 

(table 4.1).71 Because Brazilian producers are generally price takers and global prices are 

set in U.S. dollars, in the short term, Brazilian exporters are unable to increase their 

selling price to buyers in response to rising costs.72 When the real appreciates, the cost of 

inputs that are priced domestically in reais, such as labor and land, rise relative to the cost 

outlays for the same input for a farmer in the United States.73 Consequently, if the dollar 

price of the exported good remains stable, Brazilian profit margins decline.74

TABLE 4.1 Brazil’s market price of soybean exports, 2006–11 

Year Dollars per metric ton Percentage change Brazil reais per metric ton Percentage change

2006 227 493 

2007 283 24.6 550 11.5

2008 447 58.1 819 48.9

2009 400 –10.5 799 –2.5

2010 380 –5.1 668 –16.3

2011a

 516 35.8 847 26.7

Source: IMF, International Financial Statistics; Yearbook 2007, 2008; IMF, International Financial Statistics, 

October 2011. 

 aData refer to August 2011. 

The effects of exchange rate movements on exports may vary across exported products 

because each product has different shares of imported inputs and their export demands 

differ across countries, among other things. For instance, one recent economic study 

estimated that a 1 percent appreciation in the exchange rate for the Brazilian real would 

lower Brazil’s exports of soybeans and poultry by 1.23 percent and 0.63 percent, 

respectively.75 

In summary, in recent years Brazil’s real has appreciated substantially. As a result, 

Brazil’s agricultural exports have lost some of their competitiveness in world markets and 

profit margins have declined. That has prompted exporters to divert to the domestic 

market certain commodities that in previous years would have been exported.76

Factors Affecting Product Differentiation 

Brazilian food and agricultural producers differentiate their products in a number of 

ways, particularly by meeting specific customer specifications and through environmental 

and socially sustainable marketing, as elaborated below. Although many Brazilian food 

products enjoy strong brand recognition at home, Brazilian exports remain primarily 

undifferentiated, bulk commodities. 

 71 The price received in reais by Brazilian exporters is a function of both the CBOT price and the 

exchange rate between the real and the U.S. dollar. If the real increases in value relative to the U.S. dollar, 

the real price received by the exporter declines. 72 In the long run, if Brazilian producers account for a larger portion of global production of a crop, 

such as soybeans, higher costs due to an appreciating real may be increasingly reflected in the CBOT price 

for the commodity. 73 See table 6.7 for an example of the impact of exchange rate fluctuations on soybean production costs. 74 Industry representatives, interviews by USITC staff, São Paulo, Brazil, August 23, 2011. 75 Almarwani, Jolly, and Thompson, “Exchange Rates and Commodity Prices,” January 2007. 76 Industry representatives, interviews by USITC staff, São Paulo, Brazil, August 23, 2011; industry 

representative, telephone interview by USITC staff, Washington, DC, June 15, 2011. 
4-19 

Customer-Oriented Production 

Brazilian agricultural industries benefit from their emphasis on customer-oriented 

production. Certain industries produce specialty products for particular export markets. 

Poultry 

Brazilian poultry producers tend to cater to their overseas customers’ demand for niche 

products more than the U.S. industry does.77 This is likely because the Brazilian poultry 

industry was export-oriented from its inception, and domestic consumption was not the 

primary market. This is changing somewhat as domestic poultry consumption grows, but 

third-country markets are still a vital part of industry sales. 

An example of the Brazilian poultry sector’s focus on export markets is its capacity for 

halal production. Halal is a term used to designate food as permissible for consumption 

by Muslims under Islamic law. Middle Eastern consumers require poultry produced to 

halal standards, and Brazilian processors hire local Muslim imams who are licensed to 

certify halal in particular export markets, such as Saudi Arabia, Egypt, and Malaysia.78

Some Brazilian poultry firms produce nearly all their poultry as halal because it is more 

expensive to have multiple production lines in a factory, and “halal production” can be 

sold domestically or abroad to non-halal customers as well. 

For other customers who are not price sensitive but insist on exacting product standards, 

in particular the Japanese, Brazilian poultry producers hand-cut and hand-pack chicken 

parts, giving processors the ability to provide cuts to precise customer specifications. 

While labor costs for this type of production are higher than for mechanized 

production—and labor costs in the Brazilian poultry industry have quadrupled in the last 

few years––many customers are willing to pay for the increased costs.79 

The poultry industry in the United States targets certain markets and customers, but its 

largest market is the domestic market, and exports are not as vital for profitability as in 

Brazil. However, the U.S. industry is better able to satisfy U.S. and export customers who 

value large volumes of standardized product. For example, the way that U.S. processors 

debone chickens produces standardized wings for the fast food chain KFC, a key 

requirement for securing that business.80 But because U.S. poultry processing is highly 

mechanized, U.S. exporters have little flexibility in responding to specific customer 

requests for smaller orders. For a broader discussion of Brazil’s poultry industry, see 

chapter 8. 

 77 See chapter 8 for additional discussion of customer-oriented production in the Brazilian poultry 

sector. 78 Industry representative, interview by USITC staff, São Paulo, Brazil, August 22, 2011. 79 Industry representative, interview by USITC staff, São Paulo, Brazil, August 25, 2011. 80 Ibid. 
4-20 

Non-GM soybeans 

Unlike in the United States, there is considerable production in Brazil of non-GM 

soybeans, particularly in northern and western Mato Grosso.81 These soybeans can serve 

niche markets that demand them, such as in the European Union (EU-27). Because of the 

need to segregate non-GM product from GM product from the farm gate throughout the 

marketing chain, non-GM soybeans require a price premium which customers often are 

willing to pay. This premium has been in the range of R$1–$4 per sack, but is typically 

about 2 percent of the final price.82 The premium varies depending on the availability of 

non-GM production. For example, soybean production in areas near the Madeira River in 

western Mato Grosso is 90 percent non-GM and, as result, premiums are rarely offered.83

In areas where premiums are offered, owing to the scarcity of GM product, it is not clear 

that at current prices they are high enough to cover the segregation costs.84 Recently, 

global price rises have dampened customers’ ability to pay a premium for this product, 

and industry observers suggest that the higher costs of segregating non-GM soybeans 

may become prohibitive. 85 To the extent that customers, particularly in the EU-27, 

continue to demand non-GM grains, Brazil is uniquely positioned to fill that niche. 

However, prices will dictate the Brazilian dedication to that line of trade. 

Environmentally and Socially Sustainable Production 

Several programs in Brazil that promote sustainable production in both the environmental 

and social sense make it possible to differentiate agricultural products through marketing. 

Social and environmental sustainability are increasingly desirable in the global 

marketplace, and certain customers are willing to pay a premium for sustainably 

produced goods. 

One such program that involves Brazilian soybean producers is the Soy Moratorium, an 

agreement involving the members of two major Brazilian soybean and grain industry 

trade associations, including major trading companies such as ADM and Cargill. These 

firms pledged not to trade or finance soybeans harvested after July 24, 2006, in 

deforested areas within the Amazon biome. This agreement is currently in place until 

July 31, 2013. Members of the Brazilian Vegetable Oil Industry Association (ABIOVE) 

and the Brazilian Grain Exporters Association (ANEC) work with the Brazilian Ministry 

of the Environment and the National Institute of Space Research (INPE) to register 

Amazon farms and to map and monitor cleared land areas. European customers of 

Brazilian soy products have lauded the moratorium as an “essential tool” to reach their 

goal of sustainable sourcing.86

The Brazilian government’s Program for Sustainable Production of Palm Oil similarly 

seeks to encourage the production of palm oil by sustainable manufacturers not engaged 

 81 See chapter 6 for additional discussion of customer-oriented production in the Brazilian soybean 

sector. 82 Industry representatives, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011; industry 

representative, interview by USITC staff, Paraná, Brazil, August 31, 2011. 83 Industry representatives, interviews by USITC staff, Mato Grosso, August 28 and 31, 2011. 84 Industry representative, interview by USITC staff, Paraná, Brazil, August 31, 2011. 85 Industry representative, interview by USITC staff, São Paulo, Brazil, August 26, 2011. 86 ABIOVE, “The Soy Moratorium Will Be Renewed for Another Year,” October 2011; ABIOVE, 

“2010 Joint Statement of the European Soy Customer Group,” July 8, 2010. 
4-21 

in deforestation of the Amazon. Oil palm is a more intensive and lucrative use of land 

currently devoted to cattle ranching. Currently, Indonesia and Malaysia account for 

90 percent of global production of palm oil, but the industries in these countries have 

been criticized for their destruction of tropical rainforests. The Brazilian program has 

focused on sustainably produced palm oil, mainly on Brazilian degraded pastureland, and 

has committed $60 million dollars toward the development of the industry. Currently 

100,000 ha (247,000 acres) of oil palm are planted in the region of the Capim, Guamá, 

and Tocantins rivers, and the project, implemented in 44 municipalities in the North and 

Northeast, aims to increase production to 130,000 ha (320,000 acres) by 2014. According 

to Embrapa, the estimated amount of land suitable for such cultivation is close to 

30 million ha (74 million acres), more than twice the 13 million ha (32 million acres) of 

total global area harvested for oil palm currently.87 The program has a social component 

in that it encourages participation from small family farms in order to promote middleclass development. Globally, the Brazilian focus on sustainability places Southeast Asian 

producers at a disadvantage in selling to European and U.S. firms, which are increasingly 

concerned about buying palm oil associated with forest destruction. 

Brazilian biodiesel producers can also differentiate their product under the Brazilian 

government’s Social Fuel Stamp program.88 This program encourages Brazilian biodiesel 

producers to purchase feedstock, including oil palm and soybeans, from small family 

farms. Participating biodiesel producers will provide family farmers with technical 

assistance focused on sustainable agricultural practices. In return, the biodiesel 

companies benefit from the Social Fuel Stamp program (by gaining access to better 

financial conditions through BNDES and other financial institutions); the right to 

compete in auctions for the purchasing of biodiesel by the National Agency for 

Petroleum, Natural Gas, and Biofuel (ANP); certain tax exemptions; and the use of the 

Social Fuel Stamp logo for sustainability marketing. As environmental and social 

concerns garner worldwide attention demand for sustainable products may increase, 

regardless of the price premium they carry. Brazil is well positioned to take advantage of 

this emerging phenomenon. 

Factors Affecting Reliability of Export Supply 

Brazil’s impressive agricultural performance of the past few years, in terms of both 

production and exports, is likely to continue, despite the pressures faced by its farm 

sector. It will keep certain supply advantages, such as favorable government policies 

toward exports, that will facilitate its agricultural production reaching world markets. But 

as its economy grows, domestic demand for food and agricultural products will increase 

accordingly, absorbing more of Brazil’s production volumes. 

 87 Industry representative, interview by USITC staff, Brasília, Brazil, August 25, 2011. 88 The large grain trading company ADM participates in this program. ADM, “ADM to Invest in 

Sustainable Palm Production in Brazil,” February 9, 2011. 
4-22 

Rising Domestic Demand 

Economic reforms implemented after 2003 not only increased Brazil’s real per capita 

income, but also improved its income distribution.89 More people have moved into the 

formal labor force, and the middle class has expanded to 54 percent of the total 

population in 2008 from less than 42 percent in 2004. Further gains in these areas, as well 

as increased urbanization, are expected to lead to higher demand for all foods and to a 

shift from staple foods to a more diversified diet, including higher animal protein 

consumption.90 USDA projections indicate that just 3 percent annual Brazilian income 

growth will lead to gains in consumer spending on food. According to USDA, Brazil will 

need to produce 7 percent more grain and 43 percent more oilseeds above 2008 levels to 

meet projected domestic and foreign demand, particularly for livestock and biofuels 

production, by 2018.91

Poultry consumption in northeast Brazil, where the Brazilian government spends billions 

in social development funds, has risen 14 percent annually in recent years, largely due to 

the growth of the middle class.92 As a result, Brazilian poultry producers are focusing 

more than before on the domestic market. About 30 percent of Brazilian poultry 

production is currently exported, down from 45 percent two years ago.93 There is also 

stronger domestic demand for beef, particularly from the restaurant sector.94 Since Brazil 

is a large producer of beef, pork, and poultry, domestic demand for those meats also 

stimulates demand for animal feed, particularly corn and soybeans.95 

The effect of rising domestic demand on export supplies is accentuated by the strength of 

the real, which is another factor that has caused many Brazilian producers to shift their 

focus to the domestic market.96 For many commodities, including beef and chicken, the 

domestic market is currently providing better prices than export channels are. As these 

conditions persist, Brazilian producers will direct increasing amounts of their total 

production to domestic markets. If their production does not expand at the same rate, this 

will leave less product to serve their export markets. For more discussion of domestic 

consumption, see chapter 2. 

Land Available for Agricultural Expansion 

In order to maintain or increase exports and also meet rising domestic demand, Brazilian 

producers will need to boost total production. Considering Brazil’s relative land 

abundance, the future of Brazilian agricultural production appears to rest heavily on 

continuing to exploit this resource. Its prospects of doing so are limited by problems 

rehabilitating marginal land, in terms of both technology and cost, and by the Brazilian 

government’s actions to further restrict the use of protected lands. 

 89 Real per capita income (GNI per capita, PPP) increased 25 percent between 2006 and 2011. World 

Bank, Data, World Development Indicators database http://data.worldbank.org/indicator/NY.GDP.PCAP.CD 

(accessed November 22, 2011). 90 Valdes, Lopes, and Lopes, “Brazil’s Changing Food Demand Challenges the Farm Sector,” 2009. 91 Ibid. 

92 Industry representative, interview by USITC staff, São Paulo, Brazil, August 22, 2011. 93 Industry representative, interview by USITC staff, Paraná, Brazil, September 1, 2011. 94 Industry representatives, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 95 Industry representative, interview by USITC staff, São Paulo, Brazil, August 25, 2011. 96 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 
4-23 

Brazil’s current stock of agricultural land spans some 264 million ha (652 million acres), 

including land for crops (about 69 million ha, or 170 million acres) and pasture for 

grazing (about 195 million ha, or 482 million acres).97 With agricultural land around the 

world becoming more scarce as the global population continues to grow, agricultural 

productivity must increase and/or more land needs to be brought into agriculture. Brazil 

is one of the few places left on the globe with uncultivated agricultural land, without even 

considering the Amazon, an important protected biome representing 420 million ha 

(1 billion acres) of Brazil’s total 846 million ha (2 billion acres) of land area.98 The 

relatively recent cultivation of the Brazilian cerrado (204 million ha, 504 million acres, 

or 22 percent of Brazilian territory), made possible by technological advances, has 

brought large amounts of new land into agricultural use.99 Although growth in planted 

area has slowed significantly since 2005, between 2001 and 2005 planted area in Brazil 

expanded from 38 million ha (94 million acres) to 49 million ha (121 million acres), an 

increase of 30 percent.100 

Brazilian land available for agricultural expansion includes new land not currently 

planted to crops and land now used for grazing that could be converted to cropland. 

USDA forecasts that by 2018, an additional 10 million ha (25 million acres) of cropland 

in Brazil will be brought into production. Beyond that timeframe, Brazilian government 

estimates indicate that about 40 percent of current pastureland is currently degraded101

and not suitable for crops, but that 60 percent could be converted to crop production.102 

However, as agricultural production expands in Brazil, it moves to marginal lands where 

the climate is not as favorable to the land-intensive practices used in other areas, reducing 

productivity and output. For example, in northeastern Mato Grosso, weather conditions 

force later plantings and are not suitable for double-cropping. In addition, demand for 

second-crop corn in this region is limited because it is located far from key livestock 

production areas. Lack of rain there also limits the productivity of grass and, 

consequently, the weight gain of cattle. Some cattle producers counter this by feeding 

their cattle grains, but this solution may not be cost-effective.103 In addition, producers 

must consider the potential returns for their goods in making expansion investments. This 

is particularly important in light of the poor state of Brazil’s infrastructure and the slow 

pace of its development in newly opened land, which significantly raises the final costs of 

goods. 

Another factor limiting available land for agricultural production is government policy 

regarding land use in Brazil, as mentioned above. The Amazon biome is an important 

 97 FAO, FAOSTAT (accessed March 13, 2012); Economist, The Global Power of Brazilian 

Agribusiness, November 2010, 4. 98 Government of Brazil, “Geography: Biome and Vegetation; Protected Areas” (accessed November 8, 

2011). 99 In Mato Grosso, 54 percent of the land is part of the Amazon biome, while the remainder is cerrado. 100 These data double-count area used for double-cropping. 101 Degraded pasture land has typically been poorly managed or completely unmanaged, leaving the 

soil barren because of low fertility and/or high amounts of erosion. Without intervention, this type of land 

cannot support intensive crop or livestock production. Research in Brazil on ways to rehabilitate such land, 

through soil management and specialized grasses, is ongoing and promising. There are currently 72 million 

ha (180 million acres) of degraded pastureland in Brazil. Industry representative, interview by USITC staff, 

São Paulo, Brazil, August 23, 2011. 102 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 103 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 31, 2011. 
4-24 

natural resource, not only for Brazil but globally, that has been encroached upon over 

time by agriculturally based settlements. Although degraded pastureland with potential 

for agricultural production is available in abundance in areas outside the Amazon region, 

its cost can be prohibitive. It is more expensive to buy degraded pastureland and 

rehabilitate it than to buy water-abundant land in the Amazon at $100–$200 per ha and 

use it as pasture. The low price reflects the relatively poor soil quality for crops, and 

therefore settlers rely on ranching for their livelihoods.104

In addition, because property rights in the Amazon region are weakly enforced, numerous 

settlers have come to occupy areas at the edge of the Amazon, clearing the forest and 

selling the timber to large companies.105 This activity, carried out without education or 

technical assistance and multiplied by many smallholders, has made inroads into the 

Amazon forest. Over time, these settlers have been granted ownership of the land by the 

Brazilian government and permitted to continue farming there. However, the rate of land 

expansion through deforestation appears to be decreasing because of international 

attention and government monitoring and enforcement.106 These enforcement efforts, as 

well as new definitions of protected areas in the updated forest code, may discourage land 

expansion by small family farmers who lack the means to comply with the regulations, 

leaving that to owners of large, financially secure agricultural operations. 

Livestock Diseases 

Livestock diseases found in Brazil, particularly foot-and-mouth disease (FMD), limit the 

ability of Brazilian beef and pork producers to compete in many export markets. These 

markets are likely to remain closed to Brazilian pork and beef, and further market 

expansion is not likely in the short term. Consequently, Brazil’s pork exports are only 

likely to expand to markets such as Russia, Argentina, and Asian countries other than 

Japan and South Korea. 

Although traceability of the cattle herd is one way to contain outbreaks, only about 

50 percent of cattle are currently being traced. It is unlikely that the entire herd will ever 

be traceable owing to the high costs of registering millions of cattle roaming over such 

large land areas. Also, as long as Brazilian beef exports are hampered by sanitary issues, 

notably FMD, traceability is not profitable for producers to pursue. Eradicating FMD 

from the Brazilian herd, or even a portion of it, is not yet feasible because the cost of 

segregating the cattle in all links of the supply chain, including export markets, remains 

prohibitive.107 For more discussion of livestock diseases, see chapters 9 and 10. 

 

 104 The government has a program to stimulate the use of good agricultural practices by offering a low 

interest rate (5.5 percent) to farmers that buy degraded pastureland and farm it. Industry representative, 

interview by USITC staff, São Paulo, Brazil, August 25, 2011. 105 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 106 Industry representative, interview by USITC staff, São Paulo, Brazil, August 25, 2011. 107 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 
4-25 

Bibliography 

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5-1 

CHAPTER 5 

The Role of Brazilian Agribusiness in the 

Global Food Supply Chain 

Overview 

Commercial agribusiness firms in Brazil account for most of the country’s participation 

in the global food supply chain, through agricultural exports and foreign direct 

investment (FDI). A number of Brazil-based agribusinesses have evolved into large 

national and multinational corporations with a substantial impact on the country’s 

agricultural exports, particularly in the meat industry. Several of those companies have 

also expanded overseas, most notably beef and poultry companies JBS-Friboi (JBS) and 

Marfrig Frigorificos e Comercio de Alimentos S.A. (Marfrig), becoming important 

players in the United States and other markets. Multinational agribusiness firms based 

outside of Brazil also have invested heavily in Brazil’s expanding agricultural sector. In 

this way they have become important competitors in Brazil’s agricultural markets and are 

helping to shape the country’s participation in the global food supply chain, particularly 

in soybeans and grains. 

In both the United States and Brazil, farmer cooperatives have also played an important 

role in enabling farmers to export through global food supply chains. Farmer 

cooperatives are important agribusiness actors in Brazilian regions where farms tend to 

be smaller; they are particularly active in the state of Paraná, in the south of Brazil. 

Farmers use cooperatives for access to distribution facilities, purchasing of inputs, 

domestic sales and exports, and technical assistance.1

 In Mato Grosso and other areas of 

Brazil’s Center-West region, conditions favor much larger farms, and farmers are more 

likely to have access to the capital needed to operate without a cooperative structure.2

Foreign-owned multinational agribusiness firms also have a strong presence in Brazil and 

handle a significant share of Brazilian agricultural exports. Global commodity markets 

are highly integrated and to a great extent are effectively served by the “Big Four” 

multinational agribusiness firms (Bunge, Cargill, Archer Daniels Midland (ADM), and 

Louis Dreyfus), which see the goal of linking producers in one country with consumers in 

another as part of their mission. This is particularly true in grain and oilseed markets, but 

is increasingly the case in the meat sector (beef, pork, and poultry) as well. Because of 

their global presence, these companies generally do not see world markets as 

characterized by competition between suppliers in Brazil and the United States. Instead, 

they see the principal exporting countries as an integrated system on which they can rely 

to supply growing worldwide demand. Brazil and the United States, for example, have 

different growing seasons for grains, so production overlaps provide year-round supply to 

major importers.3

 Direct competition between Brazilian and U.S. producers in the focus 

 1

 For instance, Coamo Agroindustrial Cooperativa, the largest cooperative, maintains a staff of 230 

agronomists. Industry representative, interview by USITC staff, Paraná, Brazil, August 29, 2011. 2

 Industry representatives, interviews with USITC staff, Paraná, Brazil, August 22–September 1, 2011. 3

 Industry representatives, interviews by USITC staff, Washington, DC, July 12, 15, and 19, 2011. 
5-2 

products has been somewhat muted as growth in food demand in many emerging markets 

provides new sales opportunities for all exporters. In interviews, agribusiness firms 

expected this situation to continue into the foreseeable future, as emerging economies 

continue to grow and their people are able to spend more on food. In particular, rising 

global meat consumption is raising demand for meat, as well as grains and soybeans used 

for animal feed.4

Brazil has welcomed foreign agribusiness firms, which is consistent with a broader trend 

among developing countries to encourage and permit foreign participation in their 

agricultural sectors, although most multinational agribusiness firms concentrate on the 

non-farming aspects of the agricultural supply chain. The multinational firms tend to buy 

commodities from local farmers, through either markets or contract farming 

arrangements, and concentrate their direct activities in upstream industries (those that 

supply inputs, seeds, and machinery) and downstream industries (those involved in 

trading, processing, and retailing). These non-farming activities have become the most 

profitable segments of the overall food value chain.5

This chapter will describe the forces that have led to the strong growth of Brazilian 

agribusiness companies, examine the current role of agribusiness in Brazilian production 

and exports of meats, grains, and soybeans, and identify and discuss the factors that affect 

Brazilian agribusiness firms’ decisions to access the global food supply chain through 

exports or FDI. The information presented in this chapter suggests several principal 

conclusions regarding agribusiness in Brazil: 

 Economic conditions and government policies have promoted the growth of large 

agribusinesses (including large cooperatives) in Brazil for production and export 

of meats, soybeans, and grains; 

 Large agribusinesses are the primary exporters in Brazil for those products, either 

directly through large producers or through small producers’ associations with 

the Big Four multinational trading firms; 

 For Brazilian agribusinesses in the meat and poultry industries, there are strong 

incentives both to export and to grow by acquisition, at home and abroad. JBS, 

Marfrig, and Brasil Foods SA (BRF), the three largest Brazil-based agribusiness 

firms, have successfully leveraged their production strategies and knowledge of 

the industries to enter the ranks of the world’s largest protein producers and 

exporters, operating both in Brazil and in foreign markets. Brazil’s strong 

currency has made overseas acquisitions more affordable for Brazilian firms, and 

producing overseas allows these firms to access foreign markets and avoid 

sanitary and phytosanitary (SPS) barriers, such as export bans on Brazilian beef 

triggered by the presence of foot-and-mouth disease (FMD) in Brazil; 

 For Brazilian agribusinesses focused on soybeans and grains, the industry 

structure has promoted exports rather than foreign investment. Brazilian 

companies have taken advantage of economies of scale to become very large 

suppliers. Grains and soybeans are often exported whole from Brazil (without 

 4

 Ibid. 

5

 UNCTAD, World Investment Report, 2009, 94, 105–6. 
5-3 

Upstream stages: 

Input supply 

(More likely to involve 

foreign MNCs)

• Seeds (Monsanto, Syngenta, 

Embrapa)

• Fertilizers, agrochemicals (Dow 

Agroscience, Dupont)

• Equipment suppliers (John Deere, 

CLAAS, CNH)

Production and basic 

processing

(More likely for Brazilbased companies to 

engage in outbound 

FDI)

• Plantation companies (Bom 

Futuro, André Maggi Group, SLC 

Agricola)

• Grower-shippers (JBS, Marfrig, 

Brasil Foods)

Downstream stages: 

Trading, logistics, 

distribution, 

processing, retailing

(More likely to involve 

foreign MNCs)

• Wholesalers, specialist traders, 

distribution companies (Cargill, 

ADM, Bunge, Louis Dreyfus)

• Food manufacturers (Kraft, 

Nestle)

• Biofuel producers (Ecodiesel, 

Biolix, AgroDiesel)

• Supermarkets (Carrefour)

• Restaurants (McDonald's, KFC)

further processing) and processed in the importing market, allowing 

multinational distribution and trading companies to build upon their existing 

global supply chain systems and market knowledge networks to maintain control 

over Brazilian exports throughout the supply chain. 

How Brazilian Agribusinesses Decide to Enter Global 

Supply Chains 

The growth of Brazilian exports of livestock, grains, and soybeans over the last five years 

has been largely due to domestic and foreign investments boosting the scale and scope of 

Brazilian agribusiness. These investments throughout Brazil’s agricultural production 

system allow the sector to supply higher-quality foods at lower costs, making Brazilian 

food products price-competitive in global markets. As they grow, agribusiness firms must 

decide whether to enter the global food supply chain through exporting or through FDI. 

In order to analyze the effects of Brazil’s agribusinesses on the country’s rapidly 

expanding agricultural trade and investment, it is useful to have a framework, discussed 

below, showing the factors influencing the investment and export decisions of Brazilian 

agribusiness firms. 

Agribusiness refers to commercial agricultural enterprises, namely farms, ranches, 

cooperatives, and related businesses that are directly involved in the supply chain of 

agricultural products. These businesses range “across production, post-harvest handling, 

processing, transportation, marketing, distribution and other agro-based commercial 

activities” (figure 5.1), and the firms involved may or may not be multinational 

corporations (MNCs).6

 This report will focus on Brazilian firms’ participation in the 

central production and basic processing stages, and non-Brazilian firms’ participation in 

downstream trading and processing. 

 6

 OECD, Business for Development, 2008, 72. 

Source: USITC staff, based on UNCTAD, World Investment Report 2009, 108, figure III.3. 

FIGURE 5.1 The global agribusiness supply chain as viewed by Brazil 
5-4 

A common theoretical framework used to analyze the factors that determine the 

international investment choices of agribusinesses is the ownership-locationinternalization (OLI) paradigm, most notably expounded by John Dunning. 7

 In this 

paradigm, three factors are crucial to business decisions to invest across international 

borders: ownership-specific advantages, locational advantages, and internalization 

advantages. Ownership-specific advantages refer to the value of maintaining exclusive 

ownership of income-producing assets such as manufacturing tools or intellectual 

property, rather than leasing or licensing such assets to outside firms. Locational 

advantages include immobile or natural assets such as sun, soil, and water for farming, or 

the advantages conferred by doing business directly in the targeted market, such as access 

to finance or close contact with customers. Internalization advantages are benefits that 

derive from producing a good or service internally within the firm, which affects the 

ways in which the firm organizes itself. 

Of the three types of advantages, locational ones will most strongly affect a company’s 

decision to site production or marketing operations abroad, rather than exploit 

competitive advantages through international trade. Locational advantages in foreign 

markets might include lower labor costs, the ability to produce goods close to customers, 

favorable agricultural conditions, and an attractive business climate. On the other hand, 

ownership advantages more often lead to increased trade through the sale of intermediate 

goods and technology licensing rather than FDI.8

A firm’s final decision about whether to exploit its competitive advantage externally (by 

exporting) or internally (through FDI) depends on an analysis of relative business risks 

and rewards.9

 Factors specific to the FDI decision for agribusiness companies include 

access to land, the ability of food processors to contract with farmers for local food 

inputs, and nontariff measures such as SPS restrictions and technical barriers to trade 

(TBTs) that completely prevent trade in agricultural goods from some locations, but not 

from others. Figure 5.2 illustrates the range of options available to agribusinesses seeking 

to participate in the Brazilian market. The decision process that a firm uses to decide 

whether to participate overseas may be similar to the process it uses to make investment 

decisions in its home market. 

The OLI framework lends insight into firms’ decisions about entering the global food 

supply chain through trade or FDI. In the meat sector, several of Brazil’s largest 

companies, particularly JBS, Marfrig, and BRF, are globally active across the beef, 

poultry, and pork segments and have become notable outward investors to the United 

States. Operating outside of Brazil gives agribusiness firms significant locational 

advantages, including access to local markets for fresh meat products; presence in the 

 7

 The model is also known as the “eclectic paradigm.” For the author’s discussion of the model and its 

evolution see Dunning, “The Eclectic Paradigm as an Envelope,” 2000; Dunning, “The Eclectic (OLI) 

Paradigm of International Production,” 2001. 8

 Dunning’s model discusses company decisions under the OLI paradigm to engage in FDI or “other 

forms” of internationalization such as trade or contractual arrangements. UNCTAD, World Investment 

Report, 109. The other forms of internationalization can be viewed as types of trade, whether in tangible 

goods or intangible services (i.e., licensing agreements and other technology transfers). 9

 UNCTAD, World Investment Report, 2009, 109. 
5-5 

United States, the world’s largest meat market; and in the case of the beef industry, 

avoiding export restraints related to FMD. Meat companies also report internalization 

advantages from direct investment. In the United States, for example, JBS has upgraded 

slaughterhouse equipment and processes in existing U.S. facilities acquired from U.S. 

firms, bringing its in-house expertise to a new market.10 In contrast, foreign firms play a 

very small role in Brazil’s beef sector, although they are more active players in the 

poultry industry. FDI in the Brazilian poultry sector has given foreign-owned firms a 

foothold in the Brazilian domestic market and a platform for exports to new markets, 

including the European Union (EU-27), the Middle East, and Japan.11

In the soybean and grain industries, foreign-based MNCs are significant actors in the 

downstream processing and export market segments within Brazil, but the largest 

Brazilian producers have generally not invested abroad. In Mato Grosso, where farms 

tend to be very large, many producers maintain their own soybean- and grain-processing 

facilities, largely for oil and meal that will be consumed within Brazil. Soybeans and 

 10 Industry representative, interview by USITC staff, Washington, DC, August 1, 2011. 11 Industry representative, telephone interview by USITC staff, June 15, 2011. 

FDI

Exports from 

Brazil

Production

Processing and 

distribution

Contract 

farming and 

local purchase 

of inputs

Local sales in 

Brazil

FIGURE 5.2 Participation options for FDI in Brazilian agribusiness

Source: Compiled by USITC staff, based on UNCTAD, World Investment Report 2009, 110, figure III.4.
5-6 

grains for export are more often shipped unprocessed; many of the large farm producers 

export directly, while others contract with third parties such as the Big Four multinational 

traders for logistics and export services. Unlike in the meat industry, the strong global 

demand for unprocessed soybeans and grains means that there is little localization 

advantage for Brazilian farmers in investing in processing facilities in foreign markets, or 

in processing their soybeans and grains in Brazil before exporting them. 12 The 

commodity nature of the products also means that there are few ownership or 

internalization advantages promoting FDI by Brazilian firms. Table 5.1 compares the 

extent of outbound Brazilian FDI in the meat and poultry industries versus the grain and 

soybean industries. See appendix D for additional detail on FDI projects. 

TABLE 5.1 Estimated number of outbound Brazilian agribusiness investment projects in the meat, grain, and 

soybean sectors, 2003–11 

 Reported projects Meat and poultry Grains and soybeans 

Type of investment Number Value Number Value Number Value 

 Million $ Million $ Million $

Greenfield 18 820.6 18 820.6 0 0

Acquisition 21 5,406.8 19 5,296.8 2 110.0

 Total 39 6,227.4 37 6,117.4 2 110.0

Sources: Bureau van Dijk, Zephyr database (accessed November 17, 2011); Financial Times, fDiMarkets database 

(accessed November 15, 2011). 

Note: Greenfield projects are new establishments. Projects reported in press reports. May not include all relevant 

projects. Project values were not reported for all transactions, and some values are estimates. 

Incentives for the large Brazilian agribusiness firms to export include the high level of 

taxation on domestic market sales and the difficulty that large firms have in competing 

with smaller firms that may evade taxes. (See chapter 3 for more details on Brazilian tax 

policy). In addition, the concentration of vertical distribution channels in global markets 

gives Brazilian firms the ability to supply the largest supermarket and restaurant chains, 

allowing the firms to avoid some of the high costs involved in establishing their own 

horizontal distribution lines and in making the investments required to build a brand.13

Smaller grain and soybean farmers (mostly in Paraná and other southern states, but also 

in the Center-West region) generally outsource the downstream processing, exporting, 

and distribution functions to larger firms, either multinational trading and distribution 

firms or Brazilian-owned cooperatives; such firms can take advantage of economies of 

scale. The Big Four are simultaneously the largest players in the grain processing and 

distribution industry in Brazil, the United States, and China (one of the fastest-growing 

import markets), as well as in most other major global food markets.14 The multinational 

firms have significant ownership advantages in their global distribution and market 

information networks, which rely on information systems more than on-farm production 

knowledge. In Brazil, FDI by such firms tends to focus on downstream storage and 

distribution facilities, such as grain elevators and crushing facilities, rather than on-farm 

production. 

 12 However, many of these producers have large investments in Brazilian processing facilities focused 

on the domestic market. 13 Desouzart, “Brazilian Agribusiness,” 2011. 

14 According to estimates, the Big Four account for between 75 and 90 percent of global grain trade. 

Precise figures are not available. Lawrence, “The Global Food Crisis,” June 2, 2011. 
5-7 

FDI in soybean crushing facilities tends to focus on product intended for sale in the 

domestic market. Exports are shipped mostly raw, partly due to China’s status as the 

world’s leading soybean importer. Chinese government investment incentives and higher 

tariffs on processed soybean products, compared with tariffs on raw soybeans, create a 

substantial Chinese price differential between whole beans and processed meal and oil. 

Thus, it is more profitable for global firms to locate processing facilities in China rather 

than in Brazil, when the final product is destined to be sold in China. As the global 

companies have located additional crushing capacity there, China has also become a 

regional exporter, supplying much of Asia with soymeal, even while it imports soybeans 

from Brazil and elsewhere.15 Table 5.2 illustrates the extent of foreign FDI in Brazil’s 

grains and soybeans industries, compared with the meat and poultry segments. 

TABLE 5.2 Estimated number of inbound agribusiness investment projects in the Brazilian meat, grain, and 

soybean sectors, 2003–11 

 Reported projects Meat and poultry Grains and soybeans 

Type of investment 

Number of 

projects Value 

 Number of 

projects Value 

 Number of 

projects Value 

 Million $ Million $ Million $

Greenfield 33 4,226.4 1 13.5 32 4,212.9

Acquisition 28 330.1 9 26.1 19 304.0

 Total 61 4,556.5 10 39.6 51 4,516.9

Sources: Bureau van Dijk, Zephyr database (accessed November 17, 2011); Financial Times, fDiMarkets database 

(accessed November 15, 2011). 

Notes: Projects reported in press reports and not verified independently. May not include all relevant projects. 

Project values were not reported for all transactions, and some values are estimates. 

The following sections address the role of agribusiness in Brazil’s meat and soybean 

sectors, with a focus on the large agribusiness firms that are active in each sector and the 

factors that have shaped those firms’ supply chain business decisions. The sectors are 

starting to converge in some cases, as Brazil increases its use of grains for animal feed, 

and as meat and grain companies expand into each other’s markets. Appendix D lists 

selected agribusiness firms active in Brazil’s meat, poultry, grains, and soybean markets, 

to provide a sense of the scale of Brazilian agribusiness in 2011. 

Government Policies toward Agribusiness in Brazil 

Brazilian government policies over the last several decades have been significant factors 

in shaping today’s highly competitive agribusiness sector. Brazil’s national development 

strategy has promoted industrialization and urbanization since the 1930s, increasing food 

demand and helping to spur the formation of modern Brazilian agribusiness firms.16

These firms have expanded and consolidated in recent years. Brazilian companies have 

boosted their technological capabilities, allowing them to improve overall productivity 

and expand food supplies. At the same time, rising labor costs and growing land 

availability in Brazil have favored the introduction of mechanization and large-scale 

farming. These conditions have led many less productive farmers relying on older 

technology to abandon agriculture, which has contributed to industry consolidation and 

 15 Wilkinson, “Globalization of Agribusiness,” September 2009. 16 Barros, “The Challenges in Becoming an Agricultural Superpower,” 2009, 81. 
5-8 

the success of larger agribusiness firms. The Brazilian government has also reduced its 

footprint in the market through deregulation and opened Brazil’s domestic market to 

foreign firms, leading to increased competition and efficiencies. Economic stabilization 

following the successful fight against hyperinflation has also been crucial in aiding the 

success of Brazilian agribusiness.17

Several government programs enacted during the 1960s helped to modernize the 

agricultural sector, including price supports and subsidized rural credit to provide food 

security for the urban population and better compensation for farmers.18 The reduction of 

this state support in the 1980s forced private firms to fill the gap, leading to hundreds of 

billions of dollars of new investment in farm capital projects, warehouses, and processing 

facilities. At the same time, new technology increased productivity and raised export 

revenues, while Brazil removed export taxes and other export restrictions on soybeans, 

cotton, and meat and eliminated import licenses for corn, promoting competition. Price 

controls were removed in the early 1990s.19 Commodity markets were liberalized, Brazil 

unilaterally reduced many trade barriers, and private agricultural financing instruments 

were introduced to the market.20

The 1994 Real Economic Stabilization Plan generally stabilized Brazil’s economy and 

substantially reduced the country’s inflation rate, and removed significant barriers to 

foreign investment. The plan had widespread impacts across Brazil’s economy. 

Particularly important results for the agribusiness sector were the ability of foreign firms 

to acquire existing Brazilian agribusiness firms, leading to significant new foreign 

investment in agricultural research and development (R&D) and integrated supply chains, 

and the increased availability of credit to agricultural producers. This occurred as food 

demand was rising across the country due in large part to the successful stabilization of 

the economy.21

Today, several Brazilian government programs continue to provide support for the 

country’s agribusiness firms. Most importantly, the Brazilian Development Bank 

(BNDES) has played a major role in promoting the internationalization of Brazilian 

agribusiness through FDI. BNDES helps Brazilian companies identify opportunities, and 

offers financial support by lending directly to firms, guaranteeing loans that are processed 

through commercial banks, or taking direct equity shares in Brazilian companies.22 In 

2009, for example, BNDES provided support for expanding capacity, modernizing 

 17 Falling real food prices and high labor costs in the years following hyperinflation gave farmers a 

strong incentive to invest in productivity-enhancing mechanization and large-scale farming. Nassar, “Brazil 

as an Agricultural and Agroenergy Superpower,” 63; Barros, “The Challenges in Becoming an Agricultural 

Superpower,” 2009, 82. 18 Chaddad and Jank, “The Evolution of Agricultural Policies,” 2nd Quarter 2006, 86. 19 Barros, “The Challenges in Becoming an Agricultural Superpower,” 2009, 86; Chaddad and Jank, 

“The Evolution of Agricultural Policies,” 2nd Quarter 2006, 86–7; Valdes, “Brazil’s Booming Agriculture 

Faces Obstacles,” November 2006, 31. 20 The reforms were initiated largely as a response to Brazil’s debt crisis of the late 1980s and 

subsequent structural reforms. Valdes, “Brazil’s Booming Agriculture Faces Obstacles,” November 2006, 31; 

Chaddad and Jank, “The Evolution of Agricultural Policies,” 2006, 86–87. 21 Valdes, “Brazil’s Booming Agriculture Faces Obstacles,” November 2006, 32. 22 BNDES, “Internationalization of Companies” (accessed December 7, 2011); industry representatives, 

interviews by USITC staff, Mato Grosso, Brazil, August 28, 2011; industry representative, interview by 

USITC staff, Rio de Janeiro, Brazil, September 2, 2011. See chapter 3 for more details on BNDES. 
5-9 

existing facilities, and implementing new industrial units for agricultural cooperatives in 

the poultry, pork, grains, and dairy segments.23 The following tabulation shows total 

BNDES disbursements for agribusiness support in the past five years. 

BNDES disbursements to Brazil’s agribusiness sector 

Year 

Agribusiness 

disbursements

Agribusiness share of total 

BNDES disbursements 

Billion $ Percent 

2006 1.6 7 

2007 2.7 8 

2008 3.0 6 

2009 3.6 5 

2010 5.8 6 

Source: USITC calculations based on data from Brazilian 

government officials, interview by USITC staff, Rio de Janeiro, 

Brazil, September 2, 2011. 

Among other goals, BNDES has a specific aim of providing financing for Brazilian 

companies to make overseas acquisitions that will promote Brazilian exports. As noted 

by BNDES, the goal is “to encourage the insertion and the strengthening of companies in 

the international market by supporting investments or projects to be carried out 

overseas.”24 The largest Brazilian agribusiness firms have all benefited substantially from 

these policies. According to press reports, BNDES contributed $44 billion to the four 

biggest Brazilian meat companies between 2008 and 2010, and as of mid-2011, JBS and 

Marfrig together reportedly had received loans of R$18 billion ($10.6 billion) from 

BNDES. As of October 2011, BNDES controlled 35.1 percent, 30.4 percent, and 

14.0 percent of shareholder equity in BRF, JBS, and Marfrig, respectively.25 BNDES 

equity financing was used in 2010 to finance JBS’s acquisition of Pilgrim’s Pride and 

Marfrig’s acquisition of Keystone Foods, both U.S. agribusinesses, and was part of the 

financial package for the Perdigão SA-Sadia SA merger that created BRF in 2009.26 In 

February 2012, BRF accepted a $1.43 billion credit line from BNDES; the company 

reportedly planned to use the loan to finance its expansion plans.27 Some observers see 

BNDES’ support for these overseas acquisitions as a state effort to create “national 

champion” companies. In response, BNDES officials have noted that the JBS and 

Marfrig loans were made at commercial rates. It is not clear whether BNDES’ lending is 

subsidized by below-market interest rates or how much below market those rates may 

have been.28

BNDES has seemingly been quite successful in its goal of promoting the overseas 

presence of Brazilian agribusiness firms. Whether or not its strategy was specifically 

 23 BNDES, Annual Report 2009, n.d., 148 (accessed January 19, 2012). 24 BNDES, “Internationalization of Companies” (accessed December 7, 2011). 

25 Economist, “Brazil’s Development Bank,” August 5, 2010; BM&F BOVESPA, “Company Data,” 

http://www.bmfbovespa.com.br/cias-listadas/empresas-listadas/BuscaEmpresaListada.aspx?idioma=en-us

(accessed November 4, 2011); JBS SA, August/September 2011; Bureau van Dijk, Zephyr database 

(accessed October 31, 2011). 26 BNDES also holds a 23 percent stake in Laticinios Bom Gosto and may also hold equity stakes in 

other agribusiness firms. Bureau van Dijk, Zephyr M&A database (accessed November 17, 2011); Business 

Wire, “Fitch Affirms Marfrig’s Ratings,” September 9, 2010; Setor Avícola, “BNDES Will Invest an 

Additional R$2.5 Billion in Marfrig,” July 21, 2010. 27 Meatingplace.com, “Brasil Foods to Acquire $1.4 Billion Credit Line,” February 6, 2012. 28 Economist, “Brazil’s Development Bank,” August 5, 2010. 
5-10 

aimed at creating “national champions,” JBS, Marfrig, and BRF are regarded as having 

attained that status. Outside of those firms, BNDES more often makes loans rather than 

directly taking equity stakes. For example, Vanguarda recently invested R$100 million 

($60 million) in an expansion of its pork operations, of which 25 percent was paid from 

retained earnings and 75 percent by a loan from BNDES.29 However, BNDES loans 

reportedly are available only to large firms that can provide the necessary paperwork and 

can serve as large capital investments for the development bank. Once a company 

receives an initial loan from BNDES, further financing is reportedly easier, as an ongoing 

partnership has been established. For information on other investment loans provided by 

commercial banks but supported by the government, see chapter 3.30

In addition to BNDES financing, the Brazilian government has offered support to 

agribusiness through targeted R&D programs, most notably through Embrapa. Embrapa 

began a number of public-private partnership programs in the 1990s (box 5.1). 

Agribusiness in Brazil’s Beef and Poultry Industries 

Brazil’s beef and poultry exports have grown rapidly in recent years, as discussed in 

more detail in chapters 8 and 9. Since 2008, Brazilian agribusiness firms have vastly 

expanded their participation in the global food supply chain, gaining global market share 

through both exports and FDI.31 Exports accounted for a large share of production for all 

of Brazil’s three largest protein companies. JBS is the world’s largest beef exporter; the 

firm sells its products in over 100 countries. 32 For JBS, BRF, and Marfrig, exports 

represented 24 percent, 38 percent, and 38 percent, respectively, of each company’s total 

sales, although these are consolidated data for global companies, so the data include 

substantial exports from outside Brazil.33

Within Brazil, the meat and poultry agribusinesses have experienced extensive 

consolidation in recent years, allowing them to reap ownership benefits from growing 

economies of scale. Particularly large acquisitions within Brazil include the 

aforementioned merger of Sadia and Perdigão, two of Brazil’s largest poultry companies, 

to create BRF; 34 JBS’ acquisition of Bertin, a major rival in the beef business; and 

Marfrig’s acquisition of Seara Alimentos SA (Seara), formerly controlled by Cargill, all 

in 2009. All of the top three companies combine beef, poultry, and other protein 

businesses. In contrast, most of the smaller Brazilian beef and poultry firms concentrate 

on a single segment of the industry (beef or poultry) and tend to export rather than 

operate through overseas affiliates. Examples include Minerva, Brazil’s third-largest beef 

 29 BNDES financing was offered through a 10-year loan financed at an interest rate of 6.75 percent. 

Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 28, 2011. 30 Banco do Brasil and Bradesco are the largest private lenders to agribusiness. Industry representatives, 

interviews by USITC staff, Rio de Janeiro and Mato Grosso, Brazil, August 28–September 2, 2011. 31 Brazilian Meat Monitor, “Giants of the Meat Industry Are Betting on Diversifiication and Gains 

Post-Crisis,” April 8, 2011, 1. 32 JBS Web site, “History and Profile,” http://www.jbs.com.br/ir/, n.d. 33 These figures represent consolidated data from all divisions of each company, based on annual 

reports, so exports originate both inside and outside Brazil. For JBS, data are for 2010 and are reported by 

production volume. For BRF, data are for 2010 and reflect revenue share. For Marfrig, data are for 2009 and 

reflect revenue share. 34 The merger was announced in 2009 and received final antitrust approval in July 2011. Industry 

representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 
5-11 

BOX 5.1 Public-Private Partnerships with Embrapa 

The Brazilian government’s commitment to agricultural research has significantly contributed to the growth of 

agribusiness, particularly through Embrapa, Brazil’s leading public agricultural research institute. Earlier in its history, 

Embrapa directly funded the bulk of its research. Beginning in the late 1990s, however, Embrapa began to focus its 

funding on a range of domestic and international partnerships with multinational agribusiness firms and universities, 

leading to significant gains in the productivity of Brazilian agribusiness. Through the Agricultural Technology 

Development Project (the Project) (1997–2005, partially funded by the World Bank), Embrapa began funding 

research proposals through a competitive grants system which established partnerships with the private sector, 

universities, and farmers’ organizations, and increased international collaboration as well. Embrapa’s research into 

methods to improve the productivity of inferior soils allowed the cerrado region to become a major agricultural 

production area, and the development of new seeds for crops, particularly those used for animal feed, also helped to 

increase productivity.a 

During its eight-year lifespan, the Project financed 470 public/private contracts involving 112 private entities, including 

agribusiness and agricultural equipment firms and producer federations, and 89 Brazilian and foreign universities. 

Embrapa remained the leader of this agricultural research process, but the agency’s direct contribution to the 

research funding dropped from 84 percent to 50 percent between 1997 and 2005.b 

Embrapa’s public-private partnerships with agribusiness firms take several forms: 

 Partnerships with MNCs for the development of new technologies: Embrapa partners with a particular firm to 

develop research and development (R&D) projects, and the resulting technology is then made available for 

broader use in Brazil. In one example, BASF and Embrapa signed an agreement to develop herbicideresistant plant varieties. 

 Partnerships for incorporating technologies from other corporations into Embrapa products: Embrapa 

identifies and licenses existing technologies and then incorporates them into its own products, facilitating 

technology transfer to other Brazilian firms. 

 Partnerships in which Embrapa licenses its own seed varieties and technologies to Brazilian and foreign 

agribusiness firms, which may commercialize Embrapa technologies both in Brazil and abroad. Since 1998, 

Embrapa has created virtual laboratories in France, the Netherlands, the United Kingdom, and the United 

States, and also carried out cooperation projects in all South American and 13 African countries.c

Embrapa has also pursued partnership projects with Brazilian agricultural cooperatives, focusing its R&D initiatives in 

response to feedback from farmer members. In one example, Embrapa conducted research into swine and poultry 

genetics under contract with Aurora Alimentos, a large cooperative. The improved swine herd allowed Aurora to 

increase its pork production, and the close cooperation between Embrapa and Aurora ensured that the research met 

the needs of the farmers.d 

_____________ a Chaddad and Jank, “The Evolution of Agricultural Policies,” 2nd Quarter 2006, 85–90; Barros, “The Challenges 

in Becoming an Agricultural Superpower,” 2009, 97–8; industry representative, interview by USITC staff, Brasília, 

August 25, 2011; World Bank, “Implementation Completion Report,” 2006. b World Bank, “Implementation Completion Report,” 2006. 

c UNCTAD, based on inputs from Antonio Flavio Dias Avila, Embrapa (Brazil), cited in World Investment Report 

2009, 142. d Fronzaglia et al., “The Role of Agricultural Cooperatives,” 2008, 15. 
5-12 

exporter with 25 percent of beef exports, and U.S.-based Tyson, which operates three 

poultry processing plants in Brazil and supplies poultry for the domestic market and for 

export.35

The strengthening Brazilian real has made it more difficult for Brazilian companies to 

export, but it has also made it easier for large companies with access to capital to expand 

overseas through acquisitions. This in turn has allowed Brazilian firms to access markets 

that are closed to direct exports from Brazil because of certain SPS restrictions.36 Both 

Marfrig and JBS have invested heavily in the United States via JBS’s 2007 acquisition of 

Swift Foods (a beef company), its 2009 acquisition of Pilgrim’s Pride (a poultry 

producer), and Marfrig’s 2010 acquisition of Keystone Foods (Keystone) (primarily a 

beef producer). In fact, JBS’s USA division exports more beef, by volume, than its 

Mercosul division.37 JBS has become a highly globalized company, with revenue from its 

Brazilian operations now accounting for only 16 percent of the total in 2009. By contrast, 

65 percent of JBS’s revenue came from the firm’s U.S. beef and pork divisions 

combined, while 12 percent came from Australia. 

Several Brazilian firms, especially JBS and Marfrig, have extensive investments in other 

countries as well. Marfrig alone accounts for 30 percent of Uruguay’s beef production, 

and Brazilian firms together accounted for 36 percent of Uruguayan slaughter capacity in 

2011.38 The companies’ global reach has also enhanced their flexibility. For example, 

when Brazil’s processed beef exports to the United States were suspended in May 2010, 

following a recall of JBS products that were found to have impermissible levels of 

veterinary drug residues,39 Marfrig quickly announced that it would fulfill U.S. demand 

for cooked meats, tinned meats, and beef jerky via its operations in Uruguay and 

Argentina.40 Unlike JBS and Marfrig, Minerva has limited its overseas acquisitions to 

Uruguay and Paraguay. 41 Both ownership and localization factors have encouraged 

Brazilian agribusiness’ foreign acquisitions. 

The largest agribusiness companies have also branched out across segments of the protein 

industry. JBS, the world’s largest beef company, entered the poultry industry through its 

acquisition of Pilgrim’s Pride. The Bertin and Pilgrim’s Pride acquisitions made JBS the 

world’s largest protein company, surpassing Tyson. The merger with Bertin also 

introduced JBS to the dairy products segment, created the world’s largest leather 

 35 Minerva Web site, 

http://www.mzweb.com.br/minerva/web/conteudo_en.asp?idioma=1&conta=44&tipo=7663 (accessed 

September 2, 2011); industry representative, telephone interview by USITC staff, June 15, 2011; Brazilian 

Agribusiness Opportunities, “Minerva Expands Market Share,” April 13, 2011, 6. 36 Economist Intelligence Unit, “The Global Power of Brazilian Agribusiness,” 12 (accessed 

February 13, 2012). 37 JBS, Annual Report 2010, 36–38. JBS USA includes Australia. JBS Mercosul includes all South 

American operations. 38 The Brazilian-controlled share of Uruguay’s beef production includes Minerva’s entry into the 

Uruguayan market with the acquisition of Pul in 2011. Valued at $65 million, the Pul acquisition was 

announced in January 2011. Uruguayan cattle slaughter totaled 2.2 million head in 2010. Bureau van Dijk, 

Zephyr database (accessed November 17, 2011); Brazilian Meat Monitor, “Brazilian Slaughterhouses Now 

Have 36% of Slaughter in Uruguay,” January 21, 2011, 7. 39 Residues were found to exceed the maximum tolerance established by the Food and Drug 

Administration. Brazil’s Agriculture Ministry suspended exports of cooked beef products from all Brazilian 

producers to the United States between May 2010 and January 2011. 40 Brazilian Meat Monitor, “Marfrig to Redirect Exports to the USA,” May 13, 2011, 8. 41 Bureau van Dijk, Zephyr database (accessed November 9, 2011). 
5-13 

processing company, and strengthened JBS’ distribution channels in the retail and food 

services areas.42 Marfrig, likewise known primarily as a beef company, became Brazil’s 

second-largest poultry and pork producer with the Seara acquisition.43 And while BRF is 

known as a poultry company, only 17 percent of its export revenue and 11 percent of its 

total sales come from beef and poultry.44

Agribusinesses that export poultry from Brazil can be split into two distinct tiers.45 The 

first tier, made up of the biggest companies, accounts for almost one-half of total 

Brazilian poultry production. 46 BRF is by far the largest firm and was the largest 

Brazilian agribusiness exporter in 2010, with consolidated export revenues of 

R$9.1 billion ($5.4 billion) and poultry export revenue of R$5.8 billion ($3.4 billion).47

BRF’s weekly poultry slaughter is estimated at about 30 million birds, followed by 

Marfrig’s Seara division (about 15 million per week) and Doux-Frangosul, with smaller 

production levels. These major exporters typically export about 80 percent of their 

production.48 Other major poultry producers are Kaefer, Diplomata, Jandelle, and the 

cooperatives Aurora, C. Vale, Copacol, and Lar. Together, these 10 companies and 

cooperatives generated 3.6 percent of Brazil’s total (both agricultural and 

non-agricultural) 2010 export revenue. 49 BRF and Marfrig together accounted for 

72 percent of Brazil’s poultry meat exports in the first quarter of 2011.50

Firms in the second tier are mostly regional actors and tend to export closer to one-half of 

their production, slaughter about 1 million birds per week, and include Big Frango and 

Tyson do Brasil. Big Frango, which produces poultry, pigs, and cattle in several states, 

earned R$1.2 billion ($716 million) and exported to 60 countries in 2010. In 2011, Big 

Frango produced 1,000 metric tons (mt) of poultry (400,000 birds) per day, but the 

company plans to increase its poultry slaughter capacity to 500,000 birds per day in the 

next few years. In adition, Big Frango maintained a daily slaughter capacity of 1,500 pigs 

and 300 head per day of cattle and is building a processed food plant with a capacity of 

140 mt per day.51

Foreign-owned firms have not been active investors in Brazil’s beef industry, but they 

have played a larger role in the poultry segment. Several factors may play a role in these 

diverging trends. First, Brazil is ineligible to export beef to many countries due to FMD, 

so it does not serve as an attractive platform for foreign firms seeking to increase exports. 

 42 FoodBizDaily, “FBD: After Merger and Acquisitions JBS Becomes the Largest Protein Company,” 

September 21, 2009; JBS, “Acquisition of Pilgrim’s Pride and Association with Bertin S.A.,” September 16, 

2009. 43 Marfrig, 2010 Management Report, n.d., 1 (accessed February 13, 2012). 44 USITC staff calculations, based on Brasil Foods, Brasil Foods Annual and Sustainability Report 

2010, n.d., 29 (accessed February 13, 2012). 

45 The Brazilian poultry industry also includes small producers that focus on the domestic market; most 

are not approved to export. These firms mostly consist of a single production facility that slaughters about 

300,000 birds per week. As a group, they supply about one-third of Brazil’s domestic market. Industry 

representative, telephone interview by USITC staff, June 15, 2011; individual company information. 46 Brazil’s total weekly production is estimated at 110 million birds. 47 BRF, Annual Report 2010, 29 (accessed February 13, 2012). 48 Industry representative, telephone interview by USITC staff, June 15, 2011. 49 Brazilian Meat Monitor, “BRF Was the Third Largest Exporter in Brazil,” February 18, 2011, 12; 

BRF, Annual Report 2010 (accessed November 15, 2011), 29. 50 Brazilian Meat Monitor, “BRF and Marfrig Have 72% of Poultry Meat Exports,” May 20, 2011, 18. 51 Brazilian Meat Monitor, “Big Frango Group Increases Slaughter,” January 7, 2011, 12; industry 

representative, interview by USITC staff, September 1, 2011. 
5-14 

In contrast, U.S. poultry producers face export barriers that Brazilian producers do not, 

such as the EU-27 ban on certain pathogen reduction treatments (PRTs), such as chlorine 

washing, used in the United States, making Brazil of interest to poultry exporters.52

Second, the Brazilian acquisitions of U.S.-based Swift and Keystone effectively 

eliminated two of the strongest potential foreign investors in the Brazilian beef market. 

There are, however, two prominent examples of foreign firms in Brazil’s poultry market: 

Tyson Foods (United States) and Groupe Doux (France). Tyson entered the market in 

2008, acquiring poultry production plants from three Brazilian firms (Avicola Itaiopolis, 

Macedo Agroindustrial, and Frangobras). Tyson saw a locational advantage in Brazil, 

planning to use its Brazilian venture to boost exports to the EU-27, the Middle East, 

Japan, and other markets that did not import poultry from the United States.53 

JBS 

As of 2010, JBS was the world’s leading beef producer and exporter, with operations in 

the United States, Brazil, Australia, Argentina, Uruguay, and Paraguay, and a daily 

slaughtering capacity of over 86,000 head of cattle. JBS was also the world’s secondlargest poultry producer that year, with operations in the United States, Mexico, and 

Puerto Rico and a daily slaughtering capacity of approximately 7.9 million birds, as well 

as the third-largest pork producer in the United States. The company was also the world’s 

leading lamb producer and exporter, the global leader in leather tanning, and Brazil’s 

third-largest dairy producer. Other markets served by JBS include transportation, 

biodiesel, and collagen.54 In addition to Bertin and Pilgrim’s Pride, the company has 

acquired more than 30 Brazilian and foreign companies since 1996, giving it a presence 

in more than 100 countries (table 5.3).55 BNDES has been a substantial source of funding 

for these acquisitions; as of August 2011, BNDES reportedly has a 30.4 percent equity 

interest in JBS, with overall investment of more than $3 billion in the company.56 With 

regard to the OLI framework, JBS faces several specific locational advantages prompting 

it to invest abroad. The company’s strong position in Brazil’s meat industry means that it 

would likely face antitrust problems if it were to acquire poultry operations within Brazil; 

doing so in the United States removes that threat. Entering the U.S. beef market also 

allows JBS to be a direct, active player in the world’s largest beef market, and enables the 

company to export beef to third-country markets without facing FMD concerns.57

Marfrig 

In the last several years, Marfrig has become one of the largest protein-based food 

companies worldwide, with businesses in beef, pork, poultry, and fish. The company 

employs about 90,000 people in 22 countries and sells its products in more than 140 

countries. Sales revenue increased from about $1 billion in 2006 to $9.6 billion in 2010,

 52 USDA, FAS, EU-27: Update on the EU-27 Pathogen Reduction Treatment Approval Process, 

July 18, 2008. The EU ban on PRTs is discussed in more detail in chapter 9. 53 Bureau van Dijk, Zephyr database (accessed November 17, 2011); industry representative, telephone 

interview by USITC staff, June 15, 2011. 54 JBS, Annual Report 2010, n.d., 13–14 (accessed February 13, 2012). 55 BS SA, August/September 2011, n.d. (accessed February 13, 2012). 56 This figure represents separate funding allocations in 2007 and 2011. Bureau van Dijk, Zephyr 

database (accessed October 28, 2011). 57 Industry representative, interview by USITC staff, Washington, DC, August 1, 2011. 
5-15 

TABLE 5.3 Selected JBS mergers and acquisitions 

Target company name Target country Deal type 

Deal value

(million $) Completed date 

Swift & Company United States Acquisition 100% 1,425.0 July 2007 

Pilgrim’s Pride United States Acquisition 64% 800.0 December 2009 

Smithfield Beef Group United States Acquisition 100% 565.0 October 2008 

Inalca Italy Minority stake 48.6% 346.7 May 2008 

InalcaJBS Italy Acquisition increased 

from 50% to 100% 

305.6 Announced March 2011 

Swift Armour Argentina Acquisition 85.3% 200.0 September 2005 

Tatiara Meat Company Australia Acquisition 100% 27.0 February 2010 

McElhaney Feedyard United States Acquisition 100% 24.0 Announced June 2010 

Toledo International Belgium Acquisition 100% 13.8 July 2010 

Bertin Brazil Acquisition 100% (

a

) Announced September 

2009 

LSI Brazil Joint venture 100% (

a

) September 2010 

Source: Bureau van Dijk, Zephyr M&A database (accessed November 17, 2011). 

a

Not available. 

largely due to a series of acquisitions. 58 Marfrig’s principal operating units are 

highlighted in table 5.4. Although known primarily as a beef producer, Marfrig has 

recently increased its presence in the global poultry market. As noted, the company is 

now Brazil’s second-largest poultry producer. Like JBS, Marfrig benefits from the 

locational advantages of operating directly in the United States and Europe, which are 

major consuming markets, and of having acquired several FMD-free export platforms. 

In the last three years, Marfrig has completed 38 acquisitions. The company’s operations 

now cover five continents and consist of 93 processing facilities and offices, with a 

distribution network that gives access to more than 100 countries. 59 The Seara and 

Keystone acquisitions significantly expanded Marfrig’s global reach. Through Seara, 

Marfrig acquired 12 processed-food plants and a port terminal, along with Seara’s 

subsidiaries in Europe and Asia. Valued at $899 million, the transaction turned Marfrig 

into Brazil’s second largest broiler producer. Marfrig now produces 650 million broilers 

and 6 million turkeys annually.60 As a result of the Keystone acquisition, Marfrig has 

$6.4 billion in revenue and was a leading supplier to 28,000 restaurants in 13 countries, 

including such globally known chains as McDonald’s, Campbell’s, Subway, Yum! 

Brands, and Chipotle. The acquisition price was $1.26 billion.61 Marfrig continues to 

expand, investing in a poultry processing plant in Mato Grosso and cattle feedlot 

 58 Based on the exchange rate at that date. EIU, “The Global Power of Brazilian Agribusiness,” 8; 

Marfrig Web site, http://ir.marfrig.com.br/eng/comunicados/noticia.asp?id=1742 (accessed July 29, 2011); 

Bureau van Dijk, Orbis database (accessed October 7, 2011). 59 Marfrig Web site, http://ir.marfrig.com.br/eng/comunicados/noticia.asp?id=1742 (accessed July 29, 

2011); http://ir.marfrig.com.br/eng/downloads/fact_sheet/marfrig_FS_3Q10_baixa.pdf (accessed August 1, 

2011). 60 Marfrig, “MARFRIG Concludes SEARA’s Acquisition,” January 4, 2010; Wattagnet.net, “Marfrig 

in Talks with Globoaves,” March 3, 2010. 61 Marfrig, “Material Fact: Acquisition of Keystone,” June 14, 2010; Grudgings and Parra-Benal, 

“Brazil’s Marfrig to Buy Keystone Foods,” June 15, 2010. 
5-16 

TABLE 5.4 Marfrig Alimentos SA: Principal operating units

Company 

Country of 

primary 

operation Primary products Primary brands Notes 

Marfrig Brazil Production and 

processing of beef and 

lamb 

Bassi, Palatare, GJ, 

Pampeano, Seara 

Founding company began 

operations in 1986 as supplier to 

restaurants in São Paulo. 

Marfood 

USA 

United 

States 

Beef jerky, corned beef, 

nuggets, burgers 

Pemmican, Pecos 

Bill’s 

Products are sold in 17 of the 25 

largest American retail chains. 

Tacuarembó Uruguay Cooked and frozen beef, 

beef jerky, bresaola, 

organic beef, lamb 

Tacuarembó, Viva, 

Paty, Bernina 

Accounted for 30 percent of beef 

exports from Uruguay in 2010; also 

operates in Chile. 

Quickfood Argentina Beef, sausages, ham, 

beef jerky, breaded and 

frozen vegetables 

Aberdeen Angus, La 

Morocha, Paty, Seara, 

Green Life 

Exports frozen beef to more than 40 

countries. 

Moy Park Northern 

Ireland 

Organic production of 

industrialized foods made 

from chicken, turkey, and 

pork, products made from 

vegetables, and breads 

Moy Park Acquired in 2008; the largest 

integrated system of industrialized, 

poultry-based food production in the 

United Kingdom. 

Seara Brazil Poultry, pork, frozen 

ready-to-eat meals 

Seara One of the largest producers and 

exporters of food made from poultry 

and pork in the world, and a wellknown Brazilian brand. 

Keystone 

Foods 

United 

States 

Poultry, beef, fish, and 

food distribution services. 

Supplier to chain 

restaurants, food service 

companies, and retail 

outlets around the world 

Keystone Acquired in 2010; operates in 13 

countries. 

Sources: Marfrig Web site, http://ir.marfrig.com.br/eng/grupomarfrig/perfil.asp (accessed August 1, 2011); Keystone 

Foods Web site, http://www.keystonefoods.com/global-business-units/ (accessed October 4, 2011). 

operations in Argentina in 2010.62 Marfrig also entered Brazil’s turkey market in 2009, 

acquiring the turkey production assets owned by Doux Frangosul S/A Agro Avícola 

Industrial (Doux Frangosul).63

Brasil Foods 

BRF is the world’s largest poultry exporter and second-largest meat exporter. According 

to the company, BRF accounted for 9 percent of global protein trade in 2010, exports to 

140 markets, and owns three production plants outside of Brazil.64 Like JBS and Marfrig, 

BRF probably derives locational advantages from operating directly in its principal 

markets outside of Brazil, but the consolidated company is too new to have pursued this 

 62 Marfrig, “Material Fact: Marfrig and Seara Alimentos Announce Investments,” April 9, 2010; 

Marfrig, “Marfrig Invests in Feedlot Operations in Argentina,” January 27, 2010. 63 The 2009 acquisition included a slaughter plant in Rio Grande do Sul, with daily slaughter capacity 

of 30,000 turkeys; a feed plant; an incubation facility; and four farms with approximately 1 million birds for 

slaughter, 50,000 birds for the production of fertile eggs, and more than 300 integrated producers to supply 

birds. Marfrig, “Marfrig Enters the Turkey Market,” June 23, 2010. 64 BRF Web site, http://www.brasilfoods.com/ir/ (accessed November 8, 2011). 
5-17 

strategy extensively.65 Unlike JBS and Marfrig, as a poultry exporter, BRF does not have 

FMD concerns, so has fewer incentives to invest directly in foreign markets. 

In 2010, BRF shipped 32 percent of its exports to the Middle East, 21 percent to the Far 

East, and 19 percent to Europe. 66 Table 5.5 illustrates the scale of the company’s 

production and exports. BRF supplies food processing and food service companies in 

Europe, and was the first Brazilian company approved to sell processed poultry products 

to European consumers. 67 The company’s export strategy focuses on broadening its 

product lines beyond poultry to include beef, dairy, and additional processed food 

products. The domestic market accounted for 58 percent of BRF’s combined net sales in 

2009, while exports made up 42 percent.68 Marfrig and BRF together accounted for about 

45 percent of officially inspected poultry slaughter in 2010, an estimated 586 million 

head.69

TABLE 5.5 Brasil Foods: Domestic sales, exports, and total sales, by product, 2010

 Quantity Value 

Product Domestic sales Exports Total sales Domestic sales Exports Total sales

 1,000 mt R$ million 

Meats 1,837 2,278 4,115 8,668 9,051 17,719

Unprocessed 40 1,922 2,322 1,930 7,361 9,291

 Poultry 255 1,640 1,895 1,039 5,847 6,886

 Pork/beef 145 282 427 891 1,515 2,406

Processed meats 1,437 357 1,793 6,738 1,690 8,428

Dairy products 1,075 3 1,078 2,292 20 2,311

Other processed foods 455 18 473 2,026 91 2,117

Soybean products 389 6 395 529 4 533

 Total 3,756 2,306 6,062 13,515 9,166 22,681

Source: BRF, Annual and Sustainability Report 2010, n.d., 29 (accessed February 13, 2012). 

In addition to producing across the different protein segments, many poultry firms also 

grow soybeans and corn. The firms may either sell these goods or use them to produce 

feed for their poultry stocks or biofuels to power local processing operations. The Sadia 

(now BRF) facility in northern Lucas do Rio Verde, Mato Grosso, for example, is the 

largest pork and poultry processing facility in South America. The plant is a fully 

integrated operation that is also energy self-sufficient (figure 5.3); more firms are likely 

to use similar integrated facilities in the future. This plant currently sources half of its 

soybeans from small producers in order to maintain its certification in Brazil’s national 

biofuel mandate program.70

 65 And until July 2011, BRF continued to face antitrust scrutiny in Brazil, so was unlikely to plan 

significant outbound investment. Now that the Sadia-Perdigão merger has been approved, BRF may well 

consider further investment in foreign markets. 66 BRF Web site, http://www.brasilfoods.com/ir/ (accessed November 8, 2011). 67 BRF Web site, “Competitive Strengths,” http://www.brasilfoods.com/ir/ (accessed November 8, 

2011). 68 Ibid. 

69 Brazilian Meat Monitor, “After Successive Conquests, Consolidation and Diversification,”

January 27, 2011, 2. 70 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 
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Agribusiness in Brazil’s Soybean Industry 

As discussed in chapter 6, Brazil is also a huge soybean producer, but agribusiness in the 

soybean industry has developed along quite different lines than in the meat industries. 

The differences reflect the global markets for the two types of products, the different 

structures of the existing global agribusiness sectors, and the commodities themselves. 

Most Brazilian soybean exports are in the form of whole beans; many of the exports are 

controlled by the Big Four global agricultural distribution firms, all of which have 

extensive investments in Brazil. As of 2009, the Big Four accounted for over 40 percent 

of soybean crushing capacity in Brazil, and all of them were also involved in segments of 

FIGURE 5.3 BRF’s integrated, energy self-sufficient pork and poultry processing plant

Source: Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011.

Biofuel plant

Energy Feedmill

Soybean 

crusher Oil

Soybean 

meal

 Animal 

feed

Hogs and 

poultry

Soybeans

Meat products for 

domestic and export sales
5-19 

the grain industry.71 These companies are primarily processors and traders—they are not 

involved in actually growing most of the food crops that they handle. 

Brazil’s largest soybean producers are in the Center-West region of the country, 

particularly Mato Grosso. As of 2011, Brazil’s (and the world’s) largest soybean 

producer is Grupo Bom Futuro. Other large producers include André Maggi Group, 

Vanguarda, Imcopa, Caramuru, and SLC Agrícola. Most of these started as family farm 

operations in Mato Grosso and expanded over time to become large companies whose 

management relies on professional, career executives. Many of these producers have 

begun to attract investor financing, which allows steadier growth and access to capital at 

lower interest rates than are available through Brazilian bank financing. However, outside 

financing also comes with requirements for maintaining audited company accounts and a 

formalized corporate governance structure. Owing in part to such costs, the move by 

family-owned companies to more professional management is also encouraging rural 

enterprises to consolidate.72

A number of large Mato Grosso soybean producers, including Vanguarda and Imcopa, 

concentrate on non-genetically modified (GM) seed varieties, which are beneficial for 

exporting to the EU-27.73 Vanguarda is an integrated producer, growing corn, cotton, and 

other agricultural products in addition to soybeans. The company owns 10 production 

units in Mato Grosso and one in Bahia, and planted nearly 226,000 hectares (ha) 

(558,200 acres) in the 2009–10 harvest season.74 Vanguarda sends its soybeans to a 

Bunge facility for crushing and then buys back some of the meal for its own animal feed 

operations.75 Like many other Brazilian companies that primarily focus on grains and 

soybeans, Vanguarda also has a presence in the meat industry, growing out both hogs and 

cattle but sending them to other Brazilian firms for slaughter. Pork capacity is 

approximately 40,000 head, and cattle capacity is approximately 60,000 head. Vanguarda 

also operates processing facilities, including cotton processing and cottonseed crushing to 

manufacture feed and oil.76 Imcopa is another major soybean producer that performs its 

crushing operations in-house, with a combined daily crushing capacity of almost 

5,000 mt and a combined daily receiving capacity of 8,500 mt in two main production 

facilities. Imcopa deals exclusively in non-GM soybeans, and all received soybeans are 

tested for GM traits.77

The state of Paraná, in Brazil’s southern region, is also a strong producer of grains and 

soybeans. Individual producers tend to be much smaller in Paraná than in Mato Grosso, 

and far smaller than the country’s largest agribusiness firms. In order to take advantage of 

economies of scale in upstream and downstream production segments, farmers have 

organized cooperatives to handle much of the off-farm distribution and sales activities 

and to act as sources of inputs, including seed and chemicals. These cooperatives are 

 71 UNCTAD, World Investment Report, 2009, 114. 72 Savanachi, “Rei da Soja, Rei do Boi” [King of Soy, King of Beef], September 2007. 73 However, Vanguarda does rotate GM soybeans every few years in an effort to reduce weeds. 

74 The marketing year is a 12-month period, usually beginning with a new harvest, during which the 

product is marketed. Marketing years differ for each commodity and country. 75 Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 28, 2011. 76 Vanguarda was acquired by Ecodiesel, a Brazilian company focused on biodiesel production, in 

September 2011. Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 28, 2011. 77 The company’s products include crushing and production of lecithin, refined oil, soybean protein 

concentrate, and soy ethanol. Imcopa Web site, http://www.imcopa.com/ (accessed September 2, 2011). 
5-20 

among the large Brazilian agribusinesses; representative examples include Coopavel, 

COAMO, and Cocamar (box 5.2). In many cases, the cooperatives provide farmers with 

an alternative to the Big Four global agribusiness firms. 

BOX 5.2 Concept and Background: Agricultural and Livestock Cooperatives 

Brazil’s first agricultural cooperatives were established in the state of Minas Gerais in 1907, primarily for coffee; they 

were aimed at reducing the power of mostly foreign agricultural middlemen. Agricultural and livestock cooperatives 

are now established throughout Brazil, particularly in the South. Cooperatives provide a wide range of member 

services, including technical support, storage, product promotion, and social and educational assistance. The large 

cooperatives normally cover the entire production chain, from land preparation to the final sale of farm products. They 

use advanced technology in all stages of the chain and have adopted modern management and marketing 

principles.a

 The advantage of the cooperative structure is that it allows farmers with relatively small landholdings and 

limited capital resources to buy inputs and market their products on a similar scale to large farmers and processors, 

thereby benefiting from similar economies of scale. In the first half of 2011, cooperatives’ leading export products by 

value were sugar (17 percent), coffee (12.7 percent), and soybeans (12.5 percent).b

 

The state of Paraná has the largest number of agricultural cooperatives; they account for 34.5 percent of total exports 

by cooperatives, closely followed by cooperatives in the state of São Paulo (32.8 percent). In Paraná, agricultural 

cooperatives controlled 53 percent of the state’s agricultural economy in 2006, accounting for 18 percent of its gross 

domestic product (GDP). Paraná cooperatives’ total exports of $852.9 million that year were equal to 8.5 percent of 

total exports from Paraná. Minas Gerais, Rio Grande do Sul, and Santa Catarina also report significant exports by 

cooperatives, but agricultural cooperatives are a much smaller force in Mato Grosso, where farms may be as large as 

50,000 ha (123,500 acres) or more.c 

Brazil’s agricultural and livestock cooperatives, 2008

Number of cooperatives 1,544 

Total members 879,649 

Direct jobs 139,608 

Share of agricultural GDP 38.4% 

Share of cooperative GDP 47.5% 

Direct exports (2007) $3.3 billion 

Source: Organização das Cooperativas Brasileiras, Web site, “Statistics” (Web 

site dated 2008), 

http://www.brasilcooperativo.com.br/site/ramos/eng/agropecuario_numeros.asp

(accessed September 23, 2011). 

Note: Agriculture and livestock cooperatives are defined as groups that are 

made up of rural producers who own their means of production, including 

pastures and fisheries, and that manage the purchase or sale of inputs, 

production, and storage in common, and provide technical, educational, and 

social assistance to their members. 

_____________ a Organização das Cooperativas Brasileiras, “Background” (accessed September 23, 2011). b Soybean & Corn Advisor, “Brazil Ag Co-ops Report US$ 3 Billion Trade Surplus,” August 29, 2011. c

 Ritossa and Bulgacov, “Internationalization and Diversification Strategies of Agricultural Cooperatives,” 

July/September 2009, 188.

The Big Four global agribusiness firms all have extensive operations in Brazil and see 

Brazil as a major source of supply for their global trading and distribution operations.78

There are little available data on their operations or investment in Brazil, but all of them 

have extensive facilities in Brazil, including assets such as grain elevators, crushing 

facilities, port terminals, and other processing and distribution facilities. Soybeans are an 

 78 Industry representatives, interviews by USITC staff, Washington, DC, July 2011. 
5-21 

important focus for all four firms, although they also handle grains, such as wheat and 

corn, and other products, including sugar, coffee, cocoa, and orange juice. Each of the 

companies has a slightly different strategy for its Brazil operations. 

Bunge first invested in Brazil in 1904, before it began U.S. operations; about one-third of 

its global business takes place in Brazil, partly driven by the country’s historical 

differential export tax system, which was eliminated in the 1990s. Bunge operates 

between 80 and 90 grain elevators in Brazil, clustered near five ports.79 Cargill has 

operated in Brazil since 1965, and owns five soybean crushing plants, as well as 

warehouses, port terminals, and branch offices in nearly 180 cities throughout Brazil. 

Between 60 and 70 percent of Cargill’s Brazil revenues come from soybeans and corn, 

with smaller amounts from cocoa and corn processing.80 ADM is a more recent entrant to 

the Brazil market, arriving in 1997. The company’s main Brazil business is soybeans, but 

it also processes and sells corn, cocoa, and sorghum, and produces fertilizers, biofuels, 

and chemicals. As of 2011, the company owns or leases grain elevators in five states and 

owns a soy-biodiesel plant in Mato Grosso.81 ADM sources approximately 10 million mt 

of oilseeds, corn, and wheat in Brazil each year; processes about 4 million mt of soybeans 

annually in five Brazilian soy crushing facilities; and operates an elevator network with a 

crop-storage capacity of 2.2 million mt.82 Louis Dreyfus Company Brazil has focused on 

building assets such as grain elevators and crushing facilities in Brazil. It has also been 

building assets aimed at improving logistics, such as storage, contract rail, port terminals, 

and processing facilities.83

Grupo Bom Futuro 

Grupo Bom Futuro (GBF), which operates in 20 cities throughout Mato Grosso, is the 

world’s largest soybean producer and exemplifies the rapid growth of the huge farming 

operations emerging in Brazil’s Center-West region. GBF planted 230,000 ha 

(568,100 acres) with soybeans in marketing year 2009/2010, with production of 

720,000 mt, yielding revenue of R$300 million ($176.5 million) from soy alone. The 

company double-crops 90 percent of its land, so the equivalent farmed acreage is close to 

400,000 ha (988,000 acres). In addition to soybeans, GBF planted 110,000 ha 

(271,700 acres) of cotton in 2010 (30 percent of which was first crop), and 43,000 ha 

(106,200 acres) of corn (all of which was second crop). For marketing year 2010/2011, 

GBF expected to produce 550,000 mt of soybeans, representing 3 percent of total 

production in Mato Grosso (estimated at 19 million mt). Aside from soybeans, the 

company produces and distributes cotton, corn, beans, rice, and beef; farms freshwater 

fish for distribution to supermarkets in Mato Grosso; produces soybean and cotton seeds; 

and constructs hydroelectric facilities (see tabulation on next page). The company also is 

actively engaged in R&D related to new plant varieties and hybrids, farm practices, and 

fertilization management. GBF has another 200,000 ha (494,000 acres) of pastureland, 

with 50,000 head of cattle, and feedlots alongside the pasture. Company employment was 

estimated at about 3,700 workers in 2009. The company leases 70 percent of its land and 

 79 Industry representative, interview by USITC staff, Washington, DC, July 12, 2011. 80 Cargill Web site, http://www.cargill.com.br/brazil/en/home/about-cargill-brazil/index.jsp (accessed 

July 14, 2011). 81 ADM Web site, http://www.adm.com/en-US/worldwide/brazil/Pages/default.aspx (accessed 

September 2, 2011). 82 Ibid. 

83 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 
5-22 

Grupo Bom Futuro, revenue and production, major products, 2009–10 

harvest year 

Product Revenue Production 

 R$ Million ($ million) Thousand mt 

(except as noted) 

Soy 300 (176.5) 720.0 

Cotton 280 (164.7) 110.0 

Corn 200 (117.6) 60.0 

Seeds (million sacks) 150 (88.2) 1.2 

Livestock (million head) 50 (29.4) 50.0 

Fish farming 15 (8.8) 4.0 

Source: Savanachi, “Rei da Soja, Rei do Boi” [King of Soy, King of Beef], 

Dinheiro Rural, July 2010. 

directly owns the remaining 30 percent. Most exports transit through the port of 

Paranaguá.84

GBF has also expanded into the beef industry in an effort to diversify and to make better 

use of its land. The company is using a new model of soybean-livestock integration to 

increase the size of the firm’s cattle herd, and reports that its model yields annual beef 

productivity of 80 kg/ha, compared with average production in Brazil of 4 kg/ha. Under 

the new system, land is used part of the year for oilseed production. Soy fixes nitrogen in 

the soil, so the land is more productive. Cattle farmers therefore do not need to apply 

nitrogen fertilizer to the pasture, reducing costs and increasing productivity. After the 

soybean harvest, cattle graze on the land through September, when early soybean 

planting begins. GBF handles the entire beef value chain in-house, and annual sales of 

livestock have reached R$50 million ($29.4 million). As of 2010, the company expected 

to double the size of the herd to 100,000 head.85

GBF has faced problems related to infrastructure in several areas, including insufficient 

electric power, bad roads, and limited grain storage capacity. In an effort to address these 

challenges, the company has invested in a public-private partnership to install smallhydro electricity production, maximizing the potential of the rivers to generate electricity 

for its warehouses and cotton processing mills. The combined project is expected to 

generate 100 megawatts of electricity, enough to meet about half of the company’s total 

electric power demand. As of January 2011, GBF was still awaiting financing in the form 

of grants from the National Electric Energy Agency (Aneel) to start all of the projects, 

which were expected to take about two years. Total investment from GBF is expected to 

be about R$1 billion ($588.2 million). Feasibility studies began in 2008, and one plant 

began operations in 2010. The project expects to generate surplus power which will be 

sold back to the Brazilian energy market. GBF also plans to invest R$50 million 

($29.4 million) to build a grain terminal in the port of Santarém with an annual capacity 

 84 Industry representatives, interviews by USITC staff, Mato Grosso, August 28, 2011; Savanachi, “Rei 

da Soja, Rei do Boi” [King of Soy, King of Beef], July 2010; Bloomberg Business Week, “Bom Futuro 

Group: Company Overview” (accessed August 12, 2011). 85 Savanachi, “Rei da Soja, Rei do Boi” [King of Soy, King of Beef], July 2010; Beef World; “Bom 

Futuro Invests in Cattle,” April 28, 2010. 
5-23 

of 3 million mt of grain and 1.5 million mt of cargo in containers. Expected construction 

costs were reported at R$30 million ($17.5 million). Construction began in early 2011.86

 86 Tn Petroleo, “Grupo Bom Futuro deve aplicar R$1 bilhão na geração de energia elétrica” 

[Bom Futuro Group to Invest R$1 Billion in Power Generation], January 27, 2011; Marques, “Bom Futuro 

Seeks Efficiency,” June 12, 2011; Carneiro, “Soja: Megaproductor vai construir terminal” [Soy: 

Megaproducer will construct a terminal], June 29, 2010. 
5-24 

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———. “Marfrig Invests in Feedlot Operations in Argentina.” Press release, January 27, 2010. 

http://ir.marfrig.com.br/eng/downloads/fato_relevante/20100127_Material_Fact.pdf. 

———. “Material Fact: Acquisition of Keystone Foods LLC.” Press release, June 14, 2010. 

http://ir.marfrig.com.br/eng/comunicados/fatos.asp. 

———. “Material Fact: Marfrig and Seara Alimentos Announce Investments in Mato Grosso State.” 

Press release, April 9, 2010. 

http://ir.marfrig.com.br/eng/downloads/fato_relevante/20100409_Material_Fact.pdf. 

———. “Notice to the Market: Marfrig Clarifies Regarding Exports to Russia.” Press release, June 2, 

2011. http://ir.marfrig.com.br/eng/comunicados/noticia.asp?id=1778. 

Marques, Laís Costa. “Bom Futuro busca eficiencia” [Bom Futuro Seeks Efficiency]. Gazeta Digital, 

June 12, 2011. http://www.gazetadigital.com.br/conteudo/show/secao/2/materia/279120. 

Mathews, Kenneth H., Jr., and Monte Vandeveer. “Beef Production, Markets, and Trade in Argentina and 

Uruguay: An Overview.” LDP-M-159-01. U.S. Department of Agriculture (USDA), Economic 

Research Service (ERS), September 2007. 

http://www.ers.usda.gov/Publications/LDP/2007/09Sep/LDPM15901/LDPM15901.pdf. 

Meatingplace.com. “Brasil Foods Wants Assets of French Processor Doux in Brazil,” September 22, 2011.

Nassar, André Meloni. “Brazil as an Agricultural and Agroenergy Superpower.” In Brazil as an 

Economic Superpower? Understanding Brazil’s Changing Role in the Global Economy, edited by 

Lael Brainard and Leonardo Martinez-Diaz, 55–80. Washington, DC: Brookings Institution, 2009. 
5-27 

Organisation for Economic Co-Operation and Development (OECD). Business for Development: 

Promoting Commercial Agriculture in Africa. Paris: OECD, 2008. 

Pilgrim’s Pride Corp. “Wal-Mart Honors Pilgrim's Pride as “Supplier of the Year.” Press release, 

February 7, 2007. http://www.prnewswire.com/news-releases/wal-mart-honors-pilgrims-pride-assupplier-of-the-year-54655417.html. 

Poultry Production News. “Tyson Secures Alliance with Brazilian Poultry Breeder Globoaves,” 

January 27, 2009. http://poultryproductionnews.blogspot.com/2009/01/tyson-secures-alliancewith-brazilian.html. 

ThePoultrySite.“New Sales Structure for Cobb 500 in Brazil,” June 13, 2006. 

http://www.thepoultrysite.com/poultrynews/9531/new-sales-structure-for-cobb-500-in-brazil. 

Pozzobon, Daniela Maria, and Cláudio Antonio Pinheiro Machado Filho. “In Search of Cooperative 

Governance: A Brazilian Agricultural Co-Op Case Study.” Presented at the VI International 

PENSA Conference, “Sustainable Agri-food and Bioenergy Chains/Networks Economics and 

Management,” School of Business and Economics of Ribeirão Preto, University of São Paulo, 

Ribeirão Preto, São Paulo, Brazil, October 24–26, 2007. http://pensa.org.br/wpcontent/uploads/2011/10/In_search_of_cooperative_governance_a_brazilian_agricultural_co_op_

case_study_2007.pdf. 

Rama, Ruth, ed. Multinational Agribusinesses. Binghamton, NY: Haworth Press, 2005. 

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Agricultural Cooperatives: A Quantitative Study of the Agricultural Cooperatives in the State of 

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S+VAI+INVESTIR+MAIS+R$+2,5+BILHOES+NO+MARFRIG. 

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5-28 

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0726135346/Rendered/PDF/358150rev0pdf.pdf. 
6-1 

CHAPTER 6 

Soybeans 

Overview 

Soybeans remain the backbone of Brazil’s agricultural economy, fueling export-led 

growth since the 1990s. Brazilian soybeans and soybean products (meal and oil) are 

currently cost-competitive with those produced anywhere in the world, including the 

United States—the world’s largest producer (tables 6.1, 6.2, and 6.3). Advantages for the 

Brazilian soybean sector include significant areas of underutilized arable land, a tropical 

climate which encourages double-cropping, government resources devoted to agricultural 

research, private sector seed research, and capital investments in farming that boost 

productivity. 

Soybeans are the engine of growth for Brazil’s entire agricultural sector. In the tropical 

Center-West region, opportunities for double-cropping encourage corn, sorghum, and 

cotton planting in the second season.1

 Added supplies of soybeans and feed grains in 

Brazil’s domestic market have kept costs globally competitive for Brazil’s poultry and 

pork sectors and have increased agricultural exports. 

For the most part, soybeans from Brazil and the United States are highly substitutable 

commodities. However, direct competition between the two countries in third-country 

markets is limited, as large increases in global demand over the last five years, 

particularly from China, have generally outstripped soybean supplies from both 

countries.2

 In addition, complementary harvest seasons in Brazil and the United States 

allow China and other importing nations to buy freshly harvested soybeans from each in 

turn during most of the year. 3

 A decline in future demand for soybeans without a 

corresponding decline in production, however, could result in higher levels of direct 

competition between the United States and Brazil in third country markets. 

U.S. soybean exports to Japan face little competition from Brazilian product, since the 

golden color of U.S. soybeans is considered more desirable for certain food-grade 

applications than the reddish color of Brazilian soybeans. In the EU-27, however, 

Brazil’s current ability to provide conventional (non-genetically modified, or non-GM) 

soybeans and traceability at a reasonable cost gives it a competitive advantage over the 

United States. 

 1

 Double-cropping involves multiple crop plantings and harvest on the same land in the same year. In 

Brazil, corn is planted immediately after soybeans are harvested. Soybean double-cropping with corn is not 

possible in the United States because of the shorter U.S. growing season. However, double-cropping with 

winter wheat as the first crop and soybeans as the second crop is practiced in certain U.S. states. According to 

the USDA’s National Agricultural Statistics Service (NASS), 6 percent of the U.S. soybean planted acreage 

in 2011 followed another crop, mostly limited to winter wheat in states such as Virginia, Oklahoma, and 

North Carolina. USDA, NASS, Acreage, June 30, 2011. 2

 Between 2007–11, Chinese import demand for soybeans increased by 14 percent annually, a 

significantly higher rate than production and export growth in both Brazil and the United States. GTIS, 

Global Trade Atlas database (accessed April 10, 2012). 3

 The Brazilian soybean harvest begins in January, and the U.S. harvest begins in September. 
6-2 

TABLE 6.1 Soybeans: Production, consumption, and trade, selected producers and markets, marketing year 

(MY) 2010/11 (1,000 mt)

 Production Consumption Imports Exports Trade balance

Producers 

 United States 90,606 48,394 393 40,859 40,466

 Brazil 75,500 39,233 37 29,951 29,914

 Argentina 49,000 39,235 13 9,205 9,192

 China 15,100 65,950 52,339 190 –52,149

 India 9,800 10,885 0 10 10

 All other 24,174 47,882 35,713 12,205 –23,508

 Total 264,180 251,579 88,495 92,420 –

Selected major markets 

 China 15,100 65,950 52,339 190 –52,149

 EU-27 1,048 13,465 12,465 55 –12,410

 Japan 220 3,255 2,917 0 –2,917

 Russia 1,222 2,200 1,000 1 –999

 Korea 105 1,378 1,239 0 –1,239

 Subtotal 17,695 86,248 69,960 246 –69,714

Source: USDA, PSD Online (accessed January 25, 2012). 

TABLE 6.2 Soybean meal: Production, consumption, and trade, selected producers and markets, MY 2010/11 

(1,000 mt)

 Production Consumption Imports Exports Trade balance

Producers 

 United States 35,608 27,467 162 8,259 8,097

 Brazil 27,850 13,445 58 13,987 13,929

 Argentina 29,311 719 0 27,615 27,615

 China 43,560 43,382 294 472 178

 India 7,660 3,105 6 4,635 4,629

 All others 30,981 82,049 55,566 3,458 –52,108

 Total 174,970 170,167 56,086 58,426 –

Selected major markets 

 China 43,560 43,382 294 472 178

 EU-27 9,675 30,722 21,714 606 –21,108

 Japan 1,591 3,804 2,208 0 –2,208

 Russia 1,708 2,181 455 28 –427

 Korea 733 2,329 1,658 72 –1,586

 Subtotal 57,267 82,418 26,329 1,178 –25,151

Source: USDA, FAS, PSD Online (accessed January 25, 2012). 

TABLE 6.3 Soybean oil: Production, consumption, and trade, selected producers and markets, MY 2010/11 

(1,000 mt)

 Production Consumption Imports Exports Trade balance

Producers 

 United States 8,567 7,618 72 1,466 1,394

 Brazil 6,920 5,260 0 1,668 1,668

 Argentina 7,181 2,507 0 4,561 4,561

 China 9,840 11,109 1,319 52 –1,267

 India 1,715 2,650 945 2 –943

 All others 7,005 11,854 6,860 1,752 –5,108

 Total 41,228 40,998 9,196 9,501 –

Selected major markets 

 China 9,840 11,109 1,319 52 –1,267

 EU-27 2,236 2,794 905 456 –449

 Japan 378 403 19 0 –19

 Russia 389 240 21 135 114

 Korea 168 445 300 29 –271

 Subtotal 13,011 14,991 2,564 672 –1,892

Source: USDA, FAS, PSD Online (accessed January 25, 2012). 
6-3 

Nonetheless, the Brazilian soybean sector faces important disadvantages, which may curb 

its growth prospects in the future. Problems include soil with poor nutrients that requires 

large volumes of imported fertilizer to maintain yields; poor transportation infrastructure 

in areas of Brazil where additional expansion of soybean production would be most 

likely; high capital costs, which tend to restrict investment in new storage facilities; and a 

complex tax system that discourages exports of value-added oil and meal. These factors 

have raised delivered costs of Brazilian soybeans in the last several years. Brazil’s 

transportation inefficiencies alone now generally offset the soybean industry’s farm 

production cost advantage over the United States. Whether Brazil can continue its rapid 

expansion of soybean production and exports depends largely on the ability of state and 

federal governments to improve railroads, roads, waterways, and ports, as well as to 

maintain a business environment conducive to private investment. 

Global Trade in Soybeans 

Global demand for soybeans has grown considerably since the early 1990s, and traded 

volumes of soybeans and soy products now outrank wheat, traditionally the largest traded 

agricultural commodity. Global consumption reached 252 million mt in 2010/11, while 

global imports rose from less than 40 million mt in the mid-1990s to almost 90 million mt 

in 2010/11.4

 Demand worldwide is being driven by rapidly growing livestock sectors, 

which use soybean meal as a key feed ingredient, as well as the rise in human 

consumption of edible oils as diets change in developing economies. To a lesser extent, 

vegetable oil use for biodiesel production also increases demand for soybeans. The 

preference of China, the main driver of global demand over the last decade, for imports 

of whole soybeans for crushing has raised and is likely to continue to raise the global 

import demand for soybeans versus meal and oil. As these trends continue, it is estimated 

that by 2020, global import demand for soybeans will reach 137 million mt, almost 

45 million mt above 2010/11 levels.5

 

Brazil is the world’s second-largest soybean producer and exporter, after the United 

States. Although the U.S. share of some soybean markets has declined as Brazil’s exports 

have increased, the rapid growth in world demand has allowed all exporters to ship 

higher volumes, limiting direct competition between the United States, Brazil, and other 

soybean exporters. Brazil’s position as a counterseasonal supplier to the United States 

also mitigates competition between the two countries, particularly in China.6

 Whereas 

U.S. soybeans are harvested in September through November, the Brazilian harvest 

begins in January and peaks in late March. As for other markets, Brazil tends to export to 

Europe, the Middle East, and North Africa, while the United States focuses its exports on 

North American and Asian markets.7

 These patterns have roots in historical relationships 

and soybean preferences: the EU-27 has ties to South America through colonization and 

the import of conventional beans, while U.S. soybeans are preferred in several Asian 

markets, such as Japan, Taiwan, and Indonesia. There is also limited competition between 

the United States and Brazil for soybean meal and oil. Brazil tends to supply meal and oil 

to the European Union (EU-27), the Middle East, and North Africa, while the United 

States sends its meal and oil to the Americas and Asia. 

 4

 USDA, FAS, PSD Online (accessed January 25, 2012). 

5

 USDA, USDA Agricultural Projections to 2021, February 2012, table 10. 6

 Industry representatives, interviews by USITC staff, June 16–22, 2011. 7

 GTIS, Global Trade Atlas database (accessed January 18, 2012). 
6-4 

Brazilian Production, Consumption, and Trade 

Brazil is a leading global producer and exporter of soybeans, soybean oil, and soybean 

meal. As noted, in marketing year 2010/11, 8

 Brazil was the world’s second-largest 

producer and exporter of soybeans, harvesting more than 75 million mt and exporting 

nearly 30 million mt (table 6.4).9

 Both soybean production and exports increased during 

2006/07–10/11, with exports accounting for around 40 percent of production.10 Brazil’s 

growth in production is largely due to increasing yields and the expansion of soybean 

farming to newly available land, while exports have been growing to meet steadily rising 

global demand. The domestic market is almost exclusively supplied by domestic 

production, so imports are negligible. 

TABLE 6.4 Brazil: Soybean production, consumption, exports, and imports, MY 2006/07–2010/11 

2006/07 2007/08 2008/09 2009/10 2010/11 

Average

annual change 

2006/07–2010/11

1,000 mt Percent

Soybeans 

 Production 59,000 61,000 57,800 69,000 75,500 6

 Consumption 34,020 35,077 34,718 36,797 39,233 4

 Crush ratea (%) 41 40 42 41 39 (

b

)

 Exports 23,485 25,364 29,987 28,578 29,951 6

 Imports 53 150 44 174 37 –9

 Trade balance 23,432 25,214 29,943 28,404 29,914 6

Soybean meal 

 Production 24,110 24,890 24,700 26,120 27,850 4

 Consumption 11,118 12,257 12,418 12,835 13,445 5

 Exports 12,715 12,138 13,109 12,985 13,987 2

 Imports 167 180 83 86 58 –23

 Trade balance 12,548 11,958 13,026 12,899 13,929 3

Soybean oil 

 Production 5,970 6,160 6,120 6,470 6,920 4

 Consumption 3,395 3,955 4,275 5,060 5,260 12

 Exports 2,462 2,388 1,909 1,449 1,668 –9

 Imports 4 67 6 37 0 (

b

)

 Trade balance 2,458 2,321 1,903 1,412 1,668 –9

Source: USDA, FAS, PSD Online database (accessed February 2, 2012). 

 aThe crush rate is the share of total domestic supply that is crushed into meal and oil. bNot applicable. 

Between 2006/07 and 2010/11, soybean meal and oil production increased at average 

annual rates of 4 percent––slightly lower than for whole soybeans. Domestic 

consumption of oil increased annually at an average rate of 12 percent, and annual 

consumption of meal increased at an average rate of 4 percent during 2006/07–2010/11. 

 8

 The marketing year is a 12-month period, usually beginning with a new harvest, during which the 

product is marketed. Marketing years differ for each commodity and country. 9

 USDA, FAS, PSD Online (accessed October 20, 2011). 10 In 2008/09, production decreased while exports increased, resulting in an export-to-production ratio 

of 52 percent. 
6-5 

Domestic soybean oil demand is expected to continue to grow by about 150,000 mt 

annually, based on Brazil’s current 5 percent biodiesel blend mandate.11

Production of biodiesel accounts for about one-third of soybean oil consumption in 

Brazil; it is produced in 69 refineries with a total capacity of 5 billion liters.12 Human 

consumption of soybean products is also on the upswing. Brazilians are consuming more 

soy-based drinks, the market for which rose 14 percent in value between 2008 to 2009.13

As a result of increased domestic consumption, between 2006/07 and 2010/11, the share 

of Brazil’s domestic soybean meal production that was exported fell from 53 percent to 

50 percent; for oil, it fell from 41 percent to 24 percent.14 

Like other major soybean-exporting countries, Brazil ships the majority of its soybean 

exports to China (figure 6.1). Between calendar years 2006 and 2011, Brazilian soybean 

exports to China increased by 350 percent. 15 In 2011, China imported 67 percent of 

Brazilian soybean exports, or almost $11 billion––more than four times the value shipped 

to Brazil’s second-largest market, the EU-27, which was $2.7 billion (table 6.5). 16

Brazil’s soybean industry increased production in response to generally favorable prices, 

driven largely by the rapidly growing demand in China’s feed industry over this period.17

Brazilian soybean exports to Thailand, Taiwan, and Japan also more than doubled over 

the period, but from a much smaller base.18

Total soybean meal exports more than doubled over the period, with the main destination 

being the EU-27, whose livestock industry relies heavily on imported animal feed 

ingredients. Exports to Asia also grew rapidly as two major markets, Korea and Vietnam, 

experienced even higher growth rates than the EU-27. Although emerging Asian 

countries account for an increasingly large share of Brazilian soybean meal exports, 

combined they are still significantly smaller than Brazil’s number one customer, the 

EU-27, which consistently accounted for about 70 percent of Brazilian soybean meal 

exports during 2006–11.19

Brazil’s soybean oil exports fluctuated during 2006–11. China was Brazil’s largest 

market from 2007 to 2011, reflecting growing Chinese demand. The value of Brazilian 

soybean oil exports to China increased about sevenfold during this period, rising from 

9 percent of total Brazilian oil exports in 2006 to 36 percent by 2011. 

 11 In January 2010, the Brazilian government raised the mandated blend requirement for biodiesel to 

5 percent. From that date, diesel fuel offered for sale must contain at least 5 percent biodiesel. USDA, FAS, 

Brazil: Oilseeds and Products Annual, April 4, 2011. 12 USDA, FAS, Brazil: Oilseeds and Products Annual, April 4, 2011. 13 USDA, FAS, Brazil: 2010 Annual Oilseeds Report, April 6, 2010. 14 USDA, FAS, PSD Online (accessed October 20, 2011). 15 GTIS, Global Trade Atlas database (accessed March 14, 2012). 16 Ibid. 

17 USDA, FAS, Brazil: 2010 Annual Oilseeds Report, April 6, 2010. 18 GTIS, Global Trade Atlas database (accessed March 14, 2012). 19 Ibid. 
FIGURE 6.1 The United States and Brazil continued to dominate the global supply of soybeans in 2011 

Source: Compiled by USITC staff using data from GTIS, Global Trade Atlas database (accessed February 13, 2012). 

6-6 
6-7 

TABLE 6.5 Brazil: Soybean exports to selected markets, 2006–11 

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

Million $ Percent

Soybeans 

 China 2,432 2,831 5,324 6,343 7,133 10,957 35

 EU-27 2,271 2,747 3,907 3,465 2,298 2,730 4

 Thailand 172 279 536 363 445 578 27

 Taiwan 120 60 76 216 248 482 32

 Japan 50 109 215 246 193 254 38

 All other 619 682 894 792 727 1,326 17

 Total 5,663 6,709 10,952 11,424 11,043 16,327 24

Soybean meal 

 EU-27 1,615 2,094 3,254 3,269 3,302 4,010 20

 Thailand 247 206 267 348 469 563 18

 Korea 91 146 222 342 304 267 24

 Indonesia 110 177 90 130 84 156 7

 Vietnam 11 10 23 32 133 133 65

 All other 377 374 438 453 316 569 9

 Total 2,420 2,959 4,364 4,593 4,719 5,698 19

Soybean oil 

 China 114 318 830 407 786 764 46 

 India 107 183 190 132 72 174 10 

 Algeria 13 0 49 80 76 167 67 

 Egypt 10 17 46 7 11 164 75 

 Bangladesh 17 101 33 97 33 129 50 

 All other 968 1,101 1,523 511 374 731 –6

 Total 1,229 1,720 2,671 1,234 1,352 2,129 12 

Source: GTIS, Global Trade Atlas database (accessed April 10, 2012). 

Note: Totals may not add due to rounding. 

Industry Structure 

Regional Production and Processing 

Brazil became a large soybean producer during the 1970s and 1980s, when soybean 

varieties adaptable to warmer climates were developed. These varieties were first created 

in the United States and then further adapted by Empresa Brasileira de Pesquisa 

Agropecuária (Embrapa), Brazil’s government agricultural research service. 20 At that 

time, Brazilian production was limited mainly to the Southern states of Paraná and Rio 

Grande do Sul. With Embrapa’s development of soybean seeds for lower (warmer) 

geographic latitudes, and its introduction of new methods for enhancing soil conditions, 

Brazil’s soybean production moved north into the country’s central and northern regions, 

where vast tracts of previously undeveloped land in the Brazilian cerrado became 

suitable for growing soybeans. Production increased rapidly. 

The Center-West, comprising the states of Mato Grosso, Mato Grosso do Sul, Goiás, and 

the Federal District, is now the largest soybean-producing region in Brazil (table 6.6). In 

2010, the Center-West accounted for 46 percent of Brazil’s total production. Mato Grosso 

alone supplied 27 percent of the total and is also the largest soybean exporter, accounting 

 20 Goldsmith, Soybean Production and Processing in Brazil, February 20, 2008. 
6-8 

TABLE 6.6 Brazil: Soybean production by region, 2006–10 

 2006 2007 2008 2009 2010 

Average annual 

change 2006–10

 1,000 mt Percent

Center-West 25,911 26,202 29,132 28,974 31,609 5

South 17,721 22,917 20,427 18,428 25,685 10

Northeast 3,468 3,909 4,832 4,421 5,304 11

Southeast 4,102 3,662 4,012 4,079 4,298 1

North 1,262 1,167 1,430 1,443 1,623 7

 Total 52,465 57,857 59,833 57,345 68,519 7

Sources: IBGE, SIDRA database (accessed October 1, 2011). 

Note: Totals may not add due to rounding. 

 

for 30 percent of Brazil’s soybean exports in 2010.21 The Center-West region was also 

the most productive over the period, averaging yields of 2.9 mt per hectare (ha) 

(43 bushels per acre) in 2010, while the region with the lowest yields was the South (the 

states of Paraná, Santa Catarina, and Rio Grande do Sul).22 Brazilian soybean growers are 

now looking at the potential for producing soybeans in the North and Northeast, where 

there are at least 20 million ha (49 million acres) of degraded pastureland that could be 

rehabilitated for row crops. 23 The states with the most potential include Maranhão, 

Tocantins, Piauí, and Bahia.24

Processing has also been moving from traditional port areas of the South to the interior 

Center-West.25 As mentioned earlier in this study, this is partly due to Brazil’s complex 

tax system, which is discussed in more detail below.26 About 80 percent of Brazilian 

soybean oil and one-half of its soybean meal is consumed domestically, a share that has 

been rising over time, reflecting increased demand for animal feed for Brazil’s growing 

livestock and poultry sectors. Brazil’s processing capacity has increased accordingly, 

reaching 54.5 million mt in 2009/10.27 New capacity added in the Center-West increased 

daily crushing capacity to 176,834 mt in 2010.28 As a result, Brazilian crushing capacity 

now exceeds that of the United States, where 63 soybean crushing plants had a daily 

crush capacity of 142,550 mt per day in 2007.29 

Farm Size and Ownership 

Like those of other large producers, including the United States, Brazilian soybean 

production systems are modern and efficient. A notable difference between the Brazilian 

and U.S. sectors is the large size of many Brazilian soybean farms. About two-thirds of 

soybean operations in Center-West Brazil are over 2,500 ha (6,200 acres), and many are 

 21 USDA, AMS, Soybean Transportation Guide: Brazil 2010, July 2011, 25. 22 IBGE, SIDRA, Tabela 1613, “Área plantada,” n.d. 

23 Industry representative, telephone interview by USITC staff, May 26, 2011. 24 Industry representative, interview by USITC staff, Brasília, Brazil, August 25, 2011. 25 Industry representative, interview by USITC staff, São Paulo, Brazil, August 22, 2011. 26 Goldsmith and Hirsch, “The Brazilian Soybean Complex,” 2006. 

27 USDA, FAS, Brazil: 2010 Annual Oilseeds Report, April 6, 2010. 28 Approximately one-quarter of Brazil’s processing plants can crush 3,000 mt per day, and half can 

process over 1,500 mt per day. USDA, FAS, Brazil: 2010 Annual Oilseeds Report, April 6, 2010; industry 

representative, e-mail to USITC staff, August 23, 2011. 29 HighQuest Partners and SoyaTech, How the Grain and Oilseed Trade Works, 2008, 14. 
6-9 

more than 20,000 ha (49,000 acres).30 These Brazilian “mega-farms” are the result of 

huge undeveloped tracts of land becoming available in the cerrado just as technology 

began to enable rising soybean yields and mechanized harvests on flat parcels in tropical 

areas. Southern Brazilian soybean farms are much smaller––in Paraná most farms are less 

than 60 ha (148 acres).31 In 2007, the average size of a U.S. soybean farm was less than 

300 ha (740 acres).32 The Brazilian mega-farms have economies of scale that allow them 

to spread certain fixed costs, such as equipment for harvesting and planting, over many 

units of output. 

Ownership type and the degree of vertical integration differ between regions in Brazil. In 

the southern states, cooperatives help to offset the reality that smaller farmers do not have 

economies of scale. These cooperatives range from a few hundred farmers to large 

organizations with over 16,000 members.33 They provide inputs such as fertilizer and 

technical assistance, and buy the soybeans from their members after harvest. 34After 

storing and processing members’ production, the cooperatives sell the meal and oil to 

large global trading companies, or market it themselves domestically or abroad.35 In the 

Center-West region, cooperatives are not prevalent, since large operations reach similar 

economies of scale on their own. Farmers in the cerrado generally sell their harvested 

crop directly to trading companies such as Archer Daniels Midland (ADM) and Bunge, 

relying on the marketing and logistics infrastructure of these agribusinesses. 

Primary Factors Affecting Competitiveness 

Cost of Production 

The strength of the Brazilian soybean sector lies in its low cost of production. Although 

Brazilian production costs vary by state, soybean producers generally enjoy significantly 

lower field costs (particularly in terms of land and seeds) than U.S. soybean growers. In 

2010, Brazilian production costs (17–18 cents per kilogram) were only 57–61 percent of 

U.S. costs (30 cents per kilogram). Table 6.7 compares the costs of growing soybeans in 

the U.S. Heartland with costs in two large, productive soy-growing Brazilian states— 

Paraná and Mato Grosso. 36 Land and other production costs for soybeans vary 

considerably by region within Brazil; farm gate prices for soybeans are generally lowest 

in northern Mato Grosso and highest in the southern states of Paraná and Rio Grande do 

Sul. 

 30 In contrast, most farms in the midwestern United States were originally laid out before 

mechanization was widely used; sizes were generally determined by the area of land necessary to support a 

homestead. The Homestead Act of 1862 granted ownership of 65 ha (160 acres) land parcels west of the 

Mississippi River to settlers. Goldsmith, Soybean Production and Processing in Brazil, 2008, 779–804. 31 Industry representatives, interviews by USITC staff, Paraná, Brazil, August 2011. 32 USDA, NASS, Data Comparison: Major Crops, n.d. 33 Industry representatives, interviews by USITC staff, Paraná, Brazil, August 29–30, 2011. 34 Ibid. 

35 Ibid. 

36 According to the USDA’s defined resource regions, the Heartland region includes all of Illinois, 

Indiana, and Iowa, and parts of Missouri, Minnesota, South Dakota, Nebraska, Kentucky, and Ohio. 
6-10 

TABLE 6.7 Soybeans: Average 2010 costs of production at various R$/$ exchange rates (¢/kg) 

 United States 

Heartland 

Brazil 

Paraná

Mato

Grosso Paraná

Mato 

Grosso Paraná 

Mato

Grosso

 (actual) (actual) (hypothetical) (hypothetical) 

 R$1.76/$1 R$2.00/$1/US$ = 2.0 R$1.50/$1 

Seed 4.14 2.19 1.01 1.93 0.89 2.57 1.19

Fertilizer 1.22 2.00 4.68 1.76 4.12 2.35 5.49

Chemical inputs 1.20 1.74 3.17 1.54 2.79 2.05 3.72

Labor 1.23 0.56 0.77 0.49 0.68 0.65 0.90

Other operational costs 3.25 1.86 1.60 1.64 1.41 2.19 1.88

 Total, variable costs 11.04 8.35 11.23 7.35 9.89 9.80 13.18

Land 12.58 3.09 1.88 2.72 1.65 3.63 2.20

Physical capital 5.37 5.33 2.45 4.69 2.16 6.25 2.87

Other fixed costs 0.67 1.30 1.47 1.15 1.29 1.53 1.72

 Total fixed costs 18.62 9.72 5.79 8.56 5.10 11.41 6.79

Total 29.66 18.07 17.02 15.91 14.98 21.21 19.97

Source: CONAB, “Custo de Produção: Soja Plantio Direto,” May 2010; USDA, “Soybean Production and Returns,” 

2010; IMF, Exchange rates. 

Table 6.7 is denominated in U.S. dollars for comparison purposes. But exchange rates are 

a dynamic factor that affect cost competitiveness in export markets. They are important 

particularly because Brazilian export sales are predominantly denominated in dollars, 

while costs are denominated in reais. Table 6.7 shows two additional exchange rate 

scenarios, both of which have been witnessed in recent years, demonstrating that 

exchange rate fluctuations make a difference in relative production costs in Brazil and the 

United States. 

The major differences between costs in the United States and Brazil are land and seed 

costs. Current average land prices in the United States are many times those in Brazil, 

and the discrepancy is particularly wide in the expansion areas of Mato Grosso. Large 

Brazilian farms also allow growers to spread non-land capital costs over many acres, thus 

yielding a lower cost per unit.37 In addition, in the tropical Center-West region, farmers 

can reap two and sometimes three different crops on the same land each year.38 Because 

Brazil still has room for crop expansion––by some estimates up to 70 million ha 

(173 million acres) of convertible pasture land in the cerrado––land continues to be 

relatively inexpensive in Brazil when compared to the United States.39 However, new 

estimates suggest that the cost advantage historically experienced by farmers in the 

Center-West region is beginning to erode.40 For example, CONAB, part of the Brazilian 

Ministry of Agriculture, estimates that land costs per ha in Sorriso, Mato Grosso, more 

than doubled between 2010/11 and 2011/12.41

Seed costs are also lower in Brazil because of the varieties used. Many growers in Mato 

Grosso choose to grow conventional soybeans instead of GM beans in order to avoid the 

 37 Dohlman, Schnepf, and Bolling, “Soybean Production Costs and Export Competitiveness,” 

October 2001, 21. 38 Baumel et al., “Brazilian Soybeans: Can Iowa Farmers Compete?” December 2000. 

39 Dohlman, Schnepf, and Bolling, “Soybean Production Costs and Export Competitiveness,” 

October 2001, 20. 40 CONAB, “Custo de Produção: Soja Plantio Direto,” May 2011. 

41 Government official, e-mail to USITC staff, November 4, 2011. 
6-11 

technology fee, or royalty. 42 The average royalty on GM seed in Mato Grosso is 

R$0.45 per kilogram of seed.43 Several Brazilian farmers reported that GM seed does not 

always significantly improve yields in Mato Grosso, and yet can be more expensive 

because of technology fees.44

The one significant advantage that U.S. farmers have over Brazilian farmers in soybean 

production is the cost of fertilizer and other chemical inputs. Although the soil in the 

southern region of Brazil is naturally conducive to soybean production, the dark red and 

red-yellow soils found in the Center-West have a low pH and poor nutrients. They need 

to be balanced by lime and enriched with other minerals to be productive.45 On average, 

Brazilian soybean farmers spend 10 percent of their income on fertilizer, and apply 

approximately 500 kg of fertilizer per hectare.46 Brazil has large supplies of agricultural 

lime, but is deficient in several other minerals, which must be imported to produce certain 

types of fertilizer.47 Imports of fertilizer, which totaled 22.4 million mt in 2009, supplied 

60 percent of total fertilizer needs.48 Brazil also imports 80 percent of its pesticides, and 

has a higher rate of pesticide application than the United States owing to its tropical 

climate. 49 Shipping and other costs related to imports make similar fertilizers and 

chemical inputs more expensive for Brazilian farmers than for U.S. farmers. But overall, 

Brazil continues to have a significant farm gate cost advantage over the United States in 

the production of soybeans. 

Transportation Costs 

On the other hand, higher inland transportation and freight costs erode the production 

cost advantages enjoyed by soybean producers in Brazil compared with those in the 

United States. 50 Road transport by truck accounts for roughly two-thirds of soybean 

transport in Brazil.51 Costs for road transport are generally high relative to other transport 

 42 A technology fee or royalty is paid by the farmer to the seed company as part of the cost of the seed. 

It covers the technology developed with the seed, such as herbicide resistance or higher yields. Non-GM 

seeds do not have royalties, so farmers can avoid a cost by choosing a conventional seed. However, many 

farmers choose to grow GM seeds because they obtain higher yields in certain areas or have traits, e.g., pest 

resistance, not found in conventional seeds. Industry representatives, interviews by USITC staff, Mato 

Grosso, Brazil, August 31, 2011. 43 Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 31, 2011. 44 Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 31, 2011. In 

certain instances, yield increases using GM seed may have not been achieved because early GM seeds used in 

the Center-West region of Brazil were made from conventional seed that had not been adapted to the 

conditions of the region. 45 Flaskerud, Brazil’s Soybean Production and Impact, July 2003, 4. Soybeans do not need much 

nitrogen to grow, but require a significant amount of phosphorous and potassium—more than corn, wheat, 

and rice. 46 Data are for 2002. FAO, Fertilizer Use by Crop in Brazil, 2004, 46. Industry representatives, 

interviews by USITC staff, Mato Grosso, Brazil, August 28, 2011. 47 Leibold et al., “Brazil and Iowa Soybean Production: A Cost Comparison,” December 2001. 

Soybeans require more phosphorous than other crops, such as corn. 48 USDA, FAS, Brazil: 2010 Annual Oilseeds Report, April 6, 2010: Soybean and Corn Advisor,

“Brazil’s Goal is to Reduce Phosphate Imports,” October 13, 2011. 49 Industry representatives, interviews by USITC staff, São Paulo, Brazil, August 26, 2011. Leibold 

et al., “Brazil and Iowa Soybean Production: A Cost Comparison,” December 2001. Further discussion on 

Brazil’s pesticide and fertilizer use is presented in chapter 4 of this report. 50 This section is drawn from the following sources: Batista, The Transport Costs of Brazil’s Exports, 

2008, 3–14; Moreira, Volpe, and Blyde, Unclogging the Arteries, 2008, 132–40; USDA, AMS, Soybean 

Transportation Guide: Brazil 2010, July 2011. 51 Industry representative, interview by USITC staff, Washington, DC, June 23, 2011. 
6-12 

modes in Brazil due to high diesel prices and poor road conditions, as well as the fact that 

inland production regions are far from ports and major domestic markets. 

Without a viable rail network in Mato Grosso, soybeans must be transported by truck 

either for the entire trip to southern ports or for part of the way to railroad or waterway 

transfer terminals in the North. Poor road conditions lengthen the time of journeys and 

cause more frequent breakdowns of trucks. Despite efforts to do so, two of the main 

highways used to transport soy by truck––one that connects northern Mato Grosso to the 

transfer terminal of the Madeira River in Porto Velho (highway BR-364) and one that 

connects it to the Amazon River at Santarém in Pará state (highway BR-163)––remain 

largely unpaved. 52 For this reason, in 2009, while 52 percent of Brazilian soybean 

production took place above the 15th parallel, only 16 percent of production went 

through the northern ports.53 The southern ports of Paranaguá, Rio Grande, Santos, and 

São Francisco do Sul still handle over 75 percent of Brazil’s soybean exports.54 As a 

result, the practice of shipping soy over long distances using the most expensive transport 

mode––trucking—continues to contribute to high overall transportation costs. 

Transport is expected to become more efficient and less expensive with the final 

completion of highway BR-163, the 1,756-kilometer highway linking Mato Grosso to the 

northern port at Santarém,55 but rail and waterway projects will take another 10–15 years 

to finish. 56 Once the BR-163 highway is completed, it is estimated that the cost of 

trucking soybeans from farms to Santarém will drop from R$180 ($110) per mt to 

R$130 ($80) per mt, a savings of R$50 ($31) per mt.57 However, some observers have 

commented that even though BR-163 completion will result in a huge logistical benefit 

for farmers, investment in railway and waterway systems would likely decrease transit 

costs far more than investment in roads.58

Inland transportation costs in the United States are considerably lower than those in Mato 

Grosso, particularly given the less expensive barge transport down the Mississippi River 

to Gulf ports.59 Although port prices (farm gate plus inland transportation costs) vary, the 

prices of soybeans at Brazil’s ports are comparable to the prices of soybeans at U.S. 

ports. For soybeans produced in Mato Grosso, domestic transportation costs account for 

25–30 percent of the cost of soybeans at the port, compared with 8–10 percent in the 

United States (table 6.8).60

Ocean freight rates to transport soybeans to Hamburg, Germany, and Shanghai, China, 

vary, but are typically higher from Brazil than from the United States (tables 6.9 and 

6.10). Freight rates are based on many factors; any development that affects the 

 52 Industry representatives, interviews by USITC staff, São Paulo, Brazil, August 22–23, 2011. See 

figures 3.1 and 3.4 for maps depicting Brazil’s main roadways and ports, respectively. 53 Industry representative, interview by USITC staff, Brasília, Brazil, August 25, 2011. 54 Government official, interview by USITC staff, Brasília, Brazil, August 24, 2011. 55 Vera-Diaz, Kaufmann, and Nepstad, The Environmental Impacts of Soybean Expansion, May 2009, 

3. 56 USDA, FAS, Brazil: 2010 Annual Oilseeds Report, April 6, 2010. 57 Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 31, 2011. 58 Vera-Diaz, Kaufmann, and Nepstad, The Environmental Impacts of Soybean Expansion, May 2009, 

3. Highway BR-163 was originally expected to be completed in 2011. 59 Gulf ports include all sea and river ports in the following regions: East Gulf, Mississippi River, North 

Texas, and South Texas. Government official, e-mail to USITC staff, September 27, 2011. 60 Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 2011. 
6-13 

TABLE 6.8 Brazil and the United States: Domestic transportation cost share of soybeans at the port, 2006–10, 2Q 2010 

and 2Q 2011 (%) 

2006 2007 2008 2009 2010 

2Q

2010

2Q

2011

In Brazil 

 Santos port, from Northern Mato Grosso 32.5 29.5 24.4 23.0 26.9 29.7 24.6

 Rio Grande port, from Northwestern Rio Grande do Sul 7.1 7.6 5.3 6.4 7.6 9.0 9.6

 Paranaguá port, from Northern Center Paraná 9.1 10.3 7.8 6.8 9.0 10.5 8.7

 Santos port, from Southern Goiás 18.7 15.8 12.9 13.1 16.6 19.3 14.7

In the United States 

 Gulf portsa

 from Minneapolis, MN 17.7 12.6 10.1 8.9 9.5 9.2 9.5

 Gulf portsa

 from Davenport, IA 14.8 10.6 9.1 7.4 7.9 7.5 7.5

Sources: Salin, “Soybean Transportation Guide: Brazil 2010,” USDA, AMS, July 2011, 3, 50; Salin, “Soybean 

Transportation,” USDA, AMS, August, 10, 2011, 3; USDA, AMS, Grain Transportation Report, September 29, 2011, 2–3. 

 aIncludes all U.S. ports in the following regions: East Gulf, Mississippi River, North Texas, and South Texas.

TABLE 6.9 Brazil and the United States: Ocean freight rates for shipping soybeans to Hamburg, Germany, 

2006–10, 2Q 2010 and 2Q 2011 ($/mt) 

2006 2007 2008 2009 2010 

2Q

2010

2Q

2011

From Brazil 

 Santos port 47 73 52 32 34 36 35

 Rio Grande port 45 72 54 34 36 39 36

 Paranaguá port 46 71 54 33 35 38 36

From the United States 

 Gulf portsa 24 59 53 21 26 28 22

Sources: Salin, “Soybean Transportation Guide: Brazil 2010,” USDA, AMS, July 2011, 3, 50; Salin, “Soybean 

Transportation,” USDA, AMS, August, 10, 2011, 3; USDA, AMS, Grain Transportation Report, September 29, 2011, 2–3. 

a

Includes all U.S. ports in the following regions: East Gulf, Mississippi River, North Texas, and South Texas.

TABLE 6.10 Brazil and the United States: Ocean freight rates for shipping soybeans to Shanghai, China, 2006–10, 

2Q 2010 and 2Q 2011 ($/mt) 

2006 2007 2008 2009 2010 

2Q

2010

2Q

2011

From Brazil 

 Santos port 57 83 70 59 56 55 50

 Rio Grande port 56 82 72 59 58 59 51

 Paranaguá port 26 81 72 59 59 59 58

From the United States 

 Gulf portsa 42 81 81 51 62 68 52

Sources: Salin, “Soybean Transportation Guide: Brazil 2010,” USDA, AMS, July 2011, 3, 50; Salin, “Soybean 

Transportation,” USDA, AMS, August, 10, 2011, 3; USDA, AMS, Grain Transportation Report, September 29, 2011, 

2–3. 

a

Includes all U.S. ports in the following regions: East Gulf, Mississippi River, North Texas, and South Texas. 

availability of dry bulk vessels will influence the cost of ocean freight. One factor 

involves iron ore, since both soybeans and iron ore compete for similar vessels. If exports 

of iron ore decline, the availability of vessels to transport soybeans tends to increase, 

reducing freight rates for soybeans. 61 By the time the soybeans arrive in Hamburg and 

Shanghai, the total landed cost of soybeans from Brazil is generally close to the total 

landed cost of soybeans from the United States (tables 6.11 and 6.12), which would be 

 61 Moreira, Volpe, and Blyde, Unclogging the Arteries, 2008, 136. 
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TABLE 6.11 Brazil and the United States: Landed costs of soybeans in Hamburg, Germany, 2006–10, 2Q 2010 and 2Q 

2011 ($/mt) 

2006 2007 2008 2009 2010 

2Q

2010

2Q

2011

From Brazil 

 Northern Mato Grosso (via Santos port) 291 405 527 454 469 419 547

 Northwestern Rio Grande do Sul (via Rio Grande port) 272 361 471 418 409 374 506

 Northern Center Paraná (via Paranaguá port) 281 385 487 433 420 374 535

 Southern Goiás (via Santos port) 280 390 492 422 423 372 520

From the United States 

 Minneapolis, MN (via Gulf ports)a 267 373 517 420 426 399 536

 Davenport, IA (via Gulf ports)a 263 379 511 420 426 399 536

Sources: Salin, “Soybean Transportation Guide: Brazil 2010,” USDA, AMS, July 2011, 3, 50; Salin, “Soybean 

Transportation,” USDA, AMS, August, 10, 2011, 3; USDA, AMS, Grain Transportation Report, September 29, 2011, 2–3. 

 aIncludes all U.S. ports in the following regions: East Gulf, Mississippi River, North Texas, and South Texas. 

TABLE 6.12 Brazil and the United States: Landed costs of soybeans in Shanghai, China, 2006–10, 2Q 2010 and 2Q 2011 

($/mt) 

2006 2007 2008 2009 2010 

2Q

2010

2Q

2011

From Brazil 

 Northern Mato Grosso (via Santos port) 302 414 545 480 491 438 562

 Northwestern Rio Grande do Sul (via Rio Grande port) 252 370 489 443 431 393 521

 Northern Center Paraná (via Paranaguá port) 291 394 505 459 444 394 535

 Southern Goiás (via Santos port) 291 402 499 448 445 391 534

From the United States 

 Minneapolis, MN (via Gulf ports)a 285 396 556 451 464 439 566

 Davenport, IA (via Gulf ports)a 281 401 550 451 464 439 572

Sources: Salin, “Soybean Transportation Guide: Brazil 2010,” USDA, AMS, July 2011, 3, 50; Salin, “Soybean 

Transportation,” USDA, AMS, August, 10, 2011, 3; USDA, AMS, Grain Transportation Report, September 29, 2011, 2–3. 

 aIncludes all U.S. ports in the following regions: East Gulf, Mississippi River, North Texas, and South Texas. 

the expected outcome in a competitive global economy. In comparison to the United 

States, Brazilian farmers receive a smaller share of the price paid in Shanghai than do 

their U.S. counterparts. Conversely, a larger share of the destination price is used to pay 

for transportation and logistics from Brazil than from the United States. 

The development of transportation infrastructure in Brazil has not been able to keep pace 

with the rapid growth of the soybean industry. 62 Going forward, Brazilian soybean 

production may be constrained by Brazil’s inability to cost-effectively transport 

soybeans, meal, and oil from production and processing areas to ports for export. In 

addition, many port facilities are at full capacity and cannot grow quickly enough to meet 

export demands. The port of Santos, the largest port for Brazilian soybeans,63 has had to 

turn away business because of the lack of available capacity to load vessels.64 Storage 

capacity is also an issue: Brazil produces 160 million tons of grain annually but has only 

130 million tons of storage capacity.65 Most storage capacity is owned by cooperatives, 

 62 USDA, FAS, Brazil: 2010 Annual Oilseeds Report, April 6, 2010. 63 USDA, AMS, “United States and Brazil Soybean Transportation,” October 21, 2010. 64 Industry representatives, interviews by USITC staff, São Paulo State, Brazil, August 24, 2011. 65 Industry representatives, interviews by USITC staff, Paraná, Brazil, August 30, 2011. 
6-15 

processors, or ports.66 The situation is particularly problematic in the Center-West region, 

where farmers store only about 5 percent of the harvested crop on-farm.67 

Agricultural Research 

In recent decades, both public and private agricultural research have helped Brazil gain 

and maintain global prominence in soybean production and exports. The development of 

low-latitude soybean varieties in Brazil by the public research agency Embrapa in the 

1970s has been characterized as one of the most significant technological innovations in 

agriculture of the Green Revolution.68 It allowed production of a highly profitable crop to 

move into large areas of previously unproductive land, thereby transforming the soybean 

industry in Brazil. In addition, advances in short-cycle soybean varieties permit doublecropping, while the adaptation of no-till planting reduced long-term costs from soil 

degradation.69 

Recent scientific discoveries have led to protection against soybean rust, a disease caused 

by fungus that kills the soybean plant if left untreated. When soybean rust first appeared 

in Brazil in 2000, it was devastating to the Brazilian crop, particularly in Mato Grosso, 

until scientists and farmers developed effective measures to combat it. 70 Treatment 

involves double-cropping corn following soybeans 71 or spraying soybean plants with 

large amounts of fungicides, which is costly. In addition, Brazilian scientists are 

developing soybean varieties with increasing tolerance to soybean rust. In 2009, 

Embrapa, in coordination with the U.S. Agricultural Research Service (ARS), identified 

soybean genes that are rust-resistant,72 and a new rust-tolerant seed variety will likely be 

available by mid-2012.73 

In addition, Brazil’s regulatory environment has embraced GM seeds. Brazil enacted 

intellectual property laws increasing patent and plant variety protections in the mid1990s, consistent with the terms of its accession to the World Trade Organization (WTO) 

and the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement.74

These laws created additional legal avenues for seed companies to guard their new 

developments against infringement, offering companies incentives to sell new seed in 

Brazil. GM seeds rapidly gained popularity, and seed companies saw potential in new 

 66 USDA, FAS, Brazil: 2010 Annual Oilseeds Report, April 6, 2010. 67 Flaskerud, Brazil’s Soybean Production and Impact, July 2003, 11. 68 Goldsmith, Soybean Production and Processing in Brazil, February 20, 2008, 801. The Green 

Revolution is a term that describes a roughly 25-year period starting after 1960 characterized by extremely 

high growth rates in agricultural productivity in the developing world as a result of scientific breakthroughs 

in crop breeding and selection and the development of agrochemicals. During this time, governments in both 

developed and developing countries invested heavily in agricultural research. FAO, “The Green Revolution,” 

2011. 69 Contini and Reifschneider, “Agribusiness: Innovation and Competitiveness in Brazil,” 2009, 93. 70 Soybean and Corn Advisor, Frequently Asked Questions, 

http://www.soybeansandcorn.com/Frequently-Asked-Questions#seven (accessed November 28, 2011); Yang, 

Del Ponte, and Dias, “Knowing the Risk of Soybean Rust,” December 6, 2004. 71 USDA, FAS, Brazil: Oilseeds and Products Annual; 2011, April 4, 2011. 72 Soybean rust was identified in the continental United States in 2004. Suszkiw, “Scientists Identify 

Rust Resistance Genes in Soybeans,” March 26, 2009; Yang, Del Ponte, and Dias, “Knowing the Risk of 

Soybean Rust,” December 6, 2004. 73 USDA, FAS, Brazil: 2010 Annual Oilseeds Report, April 6, 2010. 74 Rodrigues, Lage, and Vasconcellos, “Intellectual Property Rights,” June 2011. 
6-16 

research focused on Brazil.75 Previously, Embrapa provided the vast majority of soybean 

seed to farmers, but that share decreased as large trading and seed companies actively 

sold GM seed in Brazil.76 Monsanto recently announced the Roundup Ready 2 seed for 

Brazil, the first seed with a biotechnology trait Monsanto developed specifically for a 

non-U.S. market.77 The regulatory approval process for GM traits in Brazil has been 

streamlined in recent years. Overall, the Brazilian government has approved 33 distinct 

GM crop varieties since 1998, with 23 of the approvals occurring within the last three 

years (see box 4.2).78

Tax System 

Brazil’s complex tax system creates supply chain distortions in the Brazilian soybean 

industry. While there are many separate taxes levied on Brazilian producers and 

consumers, the most distorting for the soybean complex is the Tax on Circulation of 

Goods and Services (ICMS), a state value-added tax charged both on intra- and interstate 

transactions. The tax rate is 7 or 12 percent (depending on the state) on all products 

transported for sale across state lines,79 and the tax is levied on all soybean products, 

including whole soybeans destined for processing in a different Brazilian state.80 In the 

context of competitiveness between U.S. and Brazilian soybean exports, the ICMS 

appears to have two principal and possibly offsetting effects. The first is that the ICMS is 

ultimately levied on domestic sales and not on exports, thereby stimulating exports 

relative to domestic consumption. The second is that the ICMS creates inefficiencies in 

Brazil’s soybean supply chain by encouraging processors to locate in the state in which 

the soybeans are grown to avoid ICMS taxes. 

The ICMS formerly applied to exports of all raw and semi-elaborated products, including 

soybeans and soybean products, but the tax on exports was eliminated by the 1996 

Kandir Law.81 In cases where soybean processing occurs in a different state than the one 

in which the soybeans were harvested, the ICMS must be paid when soybeans cross state 

lines, even if the meal and oil are then exported at a later date. In theory, this problem is 

mitigated by a tax credit offsetting (at least partially) the state-level ICMS tax; this credit 

is generated when the final goods are exported. However, not all firms are able to use all 

their credits. Although unused tax credits may be sold to another company, the traded 

market for ICMS tax credits is reportedly very thin.82 The result is that companies with 

 75 Government official, interview by USITC staff, Paraná, Brazil, August 31, 2011. 76 Industry representative, interview by USITC staff, Paraná , Brazil, August 31, 2011. 77 Monsanto, “Insect-Protected Roundup Ready 2 Yield Soybeans,” August 20, 2010. 78 Soybean and Corn Advisor, “GMO Crop Varieties Find Path to Approval in Brazil,” October 13, 

2011. 79 Deloitte, “Brazil Highlights,” 2011. 

80 Flaskerud, Brazil’s Soybean Production and Impact, July 2003, 5. 81 Goldsmith and Hirsch, “The Brazilian Soybean Complex,” 2006. 

82 Industry representative, interview by USITC staff, São Paulo, Brazil, August 22, 2011. 
6-17 

tax credits at times must hold the credits for 3–4 years before they are able to sell them, 

and often they do not receive the full value of those credits.83 

The ICMS has played a major role in determining the location of soybean processing 

facilities in Brazil. Traditionally, it was cheaper to transport and process whole soybeans 

than to transport soymeal and oil––particularly soybean oil, which requires tankers.84 As 

a result, soybean processing was concentrated in the south, close to the original growing 

regions and ports for export. However, as noted, soybean production has shifted to the 

Center-West region, far from Brazil’s East Coast ports and processing facilities; the 

ICMS, incurred on purchases of whole soybeans produced out of state, has become an 

issue for East Coast processors, resulting in a shift in soybean processing to the 

Center-West region.85 Reportedly 20 percent of southern crushing capacity was idle in 

2011, and older, less efficient plants closed altogether in the face of competition from 

newer facilities in Mato Grosso.86 

Unfortunately, the new facilities are located near soybean production but not near large 

domestic consumer markets or main ports of export. This has impacted the makeup of 

Brazil’s soybean production and exports, as Center-West producers overwhelmingly ship 

whole soybeans for export. By encouraging processing in suboptimal areas, the presence 

of the ICMS contributes to inefficiencies in the industry, making it more expensive to 

produce meal and oil in Brazil. But because the ICMS is a main source of revenue for 

state governments, politicians have little incentive to remove it.87 

Non-GM Seed and Traceability 

Brazil’s geography and infrastructure allow farmers to grow conventional (non-GM) 

soybeans for export, while still remaining cost competitive. This ability gives the country 

an advantage in product differentiation over the United States in markets that demand 

them, mainly the EU-27. The climate in certain regions of the Center-West state of Mato 

Grosso is so favorable to growing soybeans that producers there can typically achieve the 

same high yields with conventional soybeans as they do with GM seed. This is unlike the 

situation in southern Brazilian states, where soybean production is virtually all GM.88 To 

be sold as non-GM product, conventional soybeans must be segregated along the full 

marketing chain to end users. In certain regions of Brazil, not only have conventional 

beans been sold at a premium over GM beans––up to R$2–R$4 ($1.25–$2.50) per 

60-kilogram bag89––but for every 1,000 ha (2,470 acres) of conventional seed planted, 

 83 In addition, a São Paulo processor who buys whole soybeans from Mato Grosso pays a 12 percent 

tax on the shipment. However, oil produced from those soybeans in São Paulo is sold to refiners or end users 

with a reduced ICMS tax of 7 percent, since vegetable oils are considered staple foods. In effect, the 

processor is able to pass on only part of the ICMS cost to his customer and absorbs the 5 percent tax 

differential as an additional cost. Industry representative, interview by USITC staff, São Paulo, Brazil, 

August 22, 2011. 84 Industry representative, interview by USITC staff, São Paulo, Brazil, August 25, 2011; Goldsmith 

and Hirsch, “The Brazilian Soybean Complex,” 2006. 85 Industry representative, interview by USITC staff, São Paulo, Brazil, August 22, 2011. 86 Ibid. 

87 Goldsmith and Hirsch, “The Brazilian Soybean Complex,” 2006. 

88 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 89 Industry representative, interview by USITC staff, Paraná, Brazil, August 31, 2011. 
6-18 

farmers have been able to save up to R$23,000 ($14,200) on royalty fees.90 In the case of 

conventional soybean production in Mato Grosso, product is shipped to the northern port 

of Santarém on the Amazon River or to Itacoatiara in Amazonas by way of Porto Vehlo, 

where dedicated GM-free terminals handle the large volumes of conventional beans 

shipped from Mato Grosso to Europe. The large farms involved in this production are 

often capable of supplying enough soybeans to fill an entire vessel, making it relatively 

easy to keep conventional product isolated. 

Brazilian producers have exploited their natural, historic, and geographic advantages in 

order to segregate the conventional bean supply chain in a way that is not cost-effective 

in the United States. The United States has one of the highest rates of biotechnology 

adoption for soybeans in the world, and only 6 percent of soybean seeds planted 

domestically are conventional.91 Because most U.S. soybean farmers sell their soybeans 

to a local elevator, they are mixed with soybeans originating on other farms. It is not only 

costly for U.S. producers and exporters to store and ship conventional beans separately 

from GM beans, but yields of conventional beans in the United States also tend to be 

lower than those of GM seeds. This leaves little incentive for U.S. farmers to grow 

conventional soybeans.92

Changes in the markets for conventional soybeans could limit future Brazilian supplies. 

The current prevalence of conventional soybeans in western Mato Grosso means that any 

segregation costs are often borne by GM growers, who are in the minority there. 93

However, when construction and paving of the highway leading into the port of Santarém 

is completed, and the port expands, segregation might become more costly.94 In addition, 

there are very few seed companies producing non-GM seed, increasingly resulting in a 

lack of supplies.95 Among conventional growers there is a perception that seed companies 

are making it easier to use GM seeds than non-GM.96 For example, Monsanto sells both 

conventional and GM seeds in Brazil, but they often come packaged together without 

offering the farmer the option to purchase only conventional ones.97 This has begun to 

affect production levels of conventional soybeans in Mato Grosso. In 2011, conventional 

soybeans accounted for close to 40 percent of the total state production, but industry 

representatives in Brazil predicted a drop to 30 percent in 2012.98 

In addition to supplying conventional soybeans, Brazilian soybean producers are also 

able to differentiate their product by ensuring its traceability back through the supply 

chain, which is an increasingly desirable characteristic, particularly for many EU-27 

buyers. New regulations in the EU-27 require traceability for their soybean imports 

 90 Soybean and Corn Advisor, “Conventional Soybeans Gaining Acreage in Mato Grosso,” 

September 22, 2011. In 2010 in Mato Grosso, conventional soybean growers achieved comparable overall 

costs relative to GM soybeans despite much higher fungicide and herbicide costs, owing to lower costs for 

seeds/royalties, fertilizer, and postharvest handling. Industry representative, interview by USITC staff, São 

Paulo, Brazil, August 26, 2011. 91 USDA, ERS, “Adoption of Genetically Engineered Crops in the U.S.: Soybeans Varieties,” July 1, 

2011. 92 Industry representatives, interviews by USITC staff, Illinois and Missouri, September 19–23, 2011. 93 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 31, 2011. 94 Ibid. 

95 Ibid. 

96 Ibid. 

97 Ibid. 

98 Ibid. 
6-19 

because it must be proven that the soy was grown on non-deforested land.99 Although 

U.S. industry groups are working to show that soybeans grown in the United States meet 

this criterion, it is nearly impossible to trace U.S. soybean shipments back to their 

original farm because of mixing during storage and transport. Brazil’s large farm sizes 

make mixing less common, and it is therefore easier for soybeans to be traced to their 

exact growing location. In August 2011, ADM announced that it had succeeded in 

showing the EU Commission that certain South American farms met the EU’s 

environmental criteria and that their soybeans would not be contaminated with those from 

non-audited farms.100 Though ADM is headquartered in Illinois, the company chose to 

achieve this sustainability certification in South America because of the ease of 

traceability. The trade implications of this policy favor Brazil in the important EU-27 

market. 

Key Export Markets 

China 

Market Characteristics 

China has become the largest global export market for soybeans owing to the 

diversification of the Chinese diet and the needs of its rapidly growing livestock sector.101

In 2011, China imported approximately 53 million mt of soybeans, valued at $30 billion 

(table 6.13). In 2011, China imported nearly $13 billion of soybeans from the United 

States and almost $12 billion from Brazil, representing 42 percent and 40 percent of 

China’s total soybean imports, respectively.102 Argentina is the third-largest exporter to 

China.103

Chinese policy has encouraged the importation of whole soybeans for crushing within its 

borders to capture the value-added processing activity.104 Over the period 2006–10, China 

consistently crushed between 67 and 75 percent of its total soybean supply.105 China is 

not a large import market for soybean meal because it is largely self-sufficient in that 

product. It is, however, the second-largest market for soybean oil, because high levels of 

demand for cooking oil cannot be met by domestic production. China maintains a 

3 percent import tariff on whole soybeans, a 5 percent import tariff on soybean meal, and 

a 9 percent import tariff on soybean oil.106

 99 ASA, “EU Renewable Energy Directive,” n.d. 100 ADM, “ADM First to Provide ISCC-Certified Sustainable Soybeans to Europe,” August 10, 2011. 101 USITC, China’s Agricultural Trade, March 2011. 102 GTIS, Global Trade Atlas database (accessed April 10, 2012). 103 Ibid. 104 USITC, China’s Agricultural Trade, March 2011. 105 USDA, FAS, PSD Online (accessed October 20, 2011). The remaining portion is destined for 

domestic food use, feed waste, and ending stocks. 106 Commodity Online, “Soy Taxes and Tariffs: Chinese Cues for Brazil,” August 5, 2011. 
6-20 

TABLE 6.13 China: Soybean imports, by supplier, 2006–11 

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

Million $ Percent

Soybeans 

 United States 2,719 4,234 8,443 9,333 11,319 12,653 36

 Brazil 3,020 3,894 7,282 7,350 8,146 11,792 31

 Argentina 1,619 3,181 5,789 1,650 4,979 4,362 22

 Uruguay 127 155 292 321 601 807 45

 Canada 5 7 6 131 35 219 113

 All other 0 0 2 2 0 1 (

a

)

 Total 7,489 11,472 21,814 18,787 25,081 29,834 32

Soybean meal 

 India 113 32 89 45 75 87 –5

 EU-27 1 1 2 1 3 5 38

 Taiwan (

b

) (

b

) (

b

) 1 3 3 45

 United States (

b

) (

b

) (

b

) (

b

) (

b

) 1 224

 All other 36 (

b

) (

b

) (

b

) (

b

) (

b

) –65

 Total 151 33 90 47 81 96 –9

Soybean oil 

 Brazil 135 315 922 392 809 593 34

 Argentina 650 1,705 2,205 1,407 137 471 –6

 United States 14 119 206 41 255 258 79

 Korea 0 0 (

b

) 1 2 1 (

a

)

 All other (

b

) 7 1 2 (

b

) 2 40

 Total 800 2,146 3,334 1,842 1,203 1,324 11

Source: GTIS, Global Trade Atlas database (accessed March 27, 2012). 

Note: Totals may not add due to rounding. 

a

Not applicable. 

b

Less than $500,000. 

Consumption Patterns and Preferences 

China’s population and income growth as well as the change in people’s diets toward 

more proteins and edible oils led to a significant rise in domestic consumption of 

soybeans, soybean meal, and soybean oil between 2006/07 and 2010/11 (table 6.14).107

China’s domestic consumption of soybeans and soybean products is expected to keep 

growing. Increased development of the livestock and aquaculture sectors, higher GDP per 

capita, changing dietary demands, and an excess in crush capacity (discussed below) 

indicate that China is likely to remain the largest global consumer.108

China’s preference for importing raw soybeans has fueled its processing sector. There is 

currently overcapacity in the sector resulting from state-owned enterprise (SOEs) 

investment in new plants, which creates potential demand for whole soybeans.109 It is 

estimated that China’s processing capacity exceeded 100 million mt in 2011, despite the 

 107 USITC, China’s Agricultural Trade, March 2011; USDA, FAS, PSD Online (accessed October 20, 

2011). 108 USDA, FAS, China: Oilseed and Product Update, May 28, 2011. 109 Ibid. 
6-21 

TABLE 6.14 China: Soybean production, consumption, exports, and imports, MY 2006/07–2010/11 

2006/07 2007/08 2008/09 2009/10 2010/11 

Average

annual change 

2006/07–2010/11

1,000 mt Percent

Soybeans 

 Production 15,074 13,400 15,540 14,980 15,100 0

 Consumption 46,120 49,818 51,435 59,430 65,950 9

 Crush ratea (%) 74 75 69 67 68 (

b

)

 Exports 446 453 400 184 190 ‒19

 Imports 28,726 37,816 41,098 50,338 52,339 16

 Trade balance –28,280 –37,363 –40,698 –50,154 –52,149 (

b

)

Soybean meal 

 Production 28,465 31,280 32,475 38,644 43,560 11

 Consumption 27,630 30,849 31,673 37,546 43,382 12

 Exports 867 634 1,017 1,181 472 –14

 Imports 32 203 215 83 294 74

 Trade balance 835 431 802 1,098 178 (

b

)

Soybean oil 

 Production 6,410 7,045 7,325 8,726 9,840 11

 Consumption 8,670 9,693 9,486 10,435 11,109 6

 Exports 94 102 83 77 52 –14

 Imports 2,404 2,727 2,494 1,514 1,319 –14

 Trade balance –2,310 –2,625 –2,411 –1,437 –1,267 (

b

)

Source: USDA, FAS, PSD Online database (accessed February 2, 2012). 

 aThe crush rate is the share of total domestic supply that is crushed into meal and oil. bNot applicable. 

fact that in 2009 the Chinese government began actively restricting continued expansion 

in the sector, mainly by foreign and domestic private investors.110 

Competition with the United States 

China’s demand has grown steadily: whereas in 1997 China imported no soybeans, it is 

now the global import leader. The United States is the country’s largest supplier, 

exporting 25 percent of its raw soybean production to China.111 Brazil tends to be the 

largest supplier to the Chinese market from January to June, while supplies from the 

United States rise after its soybean harvest begins in September. Chinese imports 

increased from each of its four largest suppliers from 2006 to 2011, indicating the strong 

growth in Chinese demand. 

China is a major processor of soybean oil and meal from domestic and imported raw 

soybeans. In recent years, China was a slight net exporter of soybean meal and its imports 

of soybean oil are modest relative to its domestic production and consumption. During 

2006–11, China imported soybean oil mostly from three countries––Argentina, Brazil, 

and the United States. Argentina was the largest supplier during 2006–09, but, according 

to industry reports,112 China sharply reduced imports in 2010 in response to Argentina’s 

imposition of countervailing duties on certain Chinese imports.113 According to USDA, 

China officially lifted the ban in November 2010; however, Chinese imports of Argentine 

 110 USDA, FAS, China: Oilseed and Product Annual, March 1, 2011. 111 Industry representative, interview by USITC staff, Washington, DC, June 16, 2011. 112 Ibid. 113 Moore, Argentina: There and Back Again? June 2011. 
6-22 

soybean oil have remained low.114 In 2011, Brazil was the largest supplier of soybean oil 

to China, and Argentina was the second-largest. 

European Union 

Market Characteristics 

The EU-27 is the world’s second-largest soybean importer. It accounted for 

approximately 14 percent of total global imports of soybeans in 2010, or over 13 million 

mt valued at almost $6 billion (table 6.15).115 In 2011, the three largest suppliers of whole 

soybeans to the EU-27 were Brazil, Paraguay, and the United States, with Brazil 

exporting as much to the EU-27 as the United States and Paraguay combined. Although 

the quantity of beans exported from the United States to the EU-27 declined during 

2006–10, the United States and Paraguay have gained market share because the EU-27’s 

imports from Brazil have fallen at a faster rate. Historically, the United States was the 

second largest supplier of soybeans to the EU, but in 2011 Paraguay overtook that 

position. Paraguay’s soybean production has grown rapidly, and exports, including to the 

EU-27, accounted for 80 percent of Paraguay’s total output of 8.4 million mt in 

2010/11.116 

The EU-27 is the largest global importer of soybean meal, which is used for animal feed 

for the EU-27 livestock sector. Argentina and Brazil are its main import suppliers. The 

volume of EU-27 imports of soybean meal trended slightly downward over the period 

2006–10 in favor of using its domestically produced rapeseed meal in animal feed, a 

trend that may continue long-term depending on the availability of other oilseeds.117 

Consumption Patterns and Preferences 

Domestic EU-27 consumption of soybeans, soybean meal, and soybean oil has fallen 

slightly over the period (table 6.16). Domestic production of soybeans is limited and 

soybean meal production in the EU-27 covers only a modest share of consumption in 

most years; the remainder is served by imports. Most soybeans shipped to the EU-27 are 

crushed into soybean meal and oil; the EU-27 crushes nearly 90 percent of its total 

soybean supply annually.118 Soybean meal is used as feed in the EU-27 livestock sector 

and competes with other oilseed meals for this use. GM soybeans or oil produced from 

GM soybeans are not generally used for human food applications in the EU-27 owing to 

 114 USDA, FAS, China: Oilseed and Product Update, May 28, 2011. 115 GTIS, Global Trade Atlas database (accessed April 10, 2012). At the time of publication of this 

report several countries had not yet reported import data for 2011, including several relatively large soybean 

importers (Egypt, Iran, Israel, Tunisia, and Saudi Arabia). In 2010, those five countries imported $1.7 billion 

worth of soybeans, accounting for approximately 4 percent of global soybean imports. 116 By comparison, in 2006/07 Paraguay’s soybean exports accounted for 74 percent of its total soybean 

output of 5.6 million mt. USDA, FAS, PSD Online (accessed April 10, 2012). 117 USDA, FAS, EU-27 Soybean Imports from the United States Still Impeded, November 3, 2009. 118 USDA, FAS, PSD Online (accessed October 20, 2011). 
6-23 

TABLE 6.15 EU-27: Soybean imports, by supplier, 2006–11 

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

Million $ Percent

Soybeans 

 Brazil 2,298 3,260 4,521 3,922 2,584 2,756 4

 Paraguay 248 337 479 319 1,012 1,410 42

 United States 843 1,119 1,846 818 1,370 1,263 8

 Canada 146 319 351 266 621 647 35

 Ukraine 27 28 74 71 63 249 56

 All other 73 156 302 130 296 273 30

 Total 3,635 5,239 7,573 5,526 5,947 6,598 13

Soybean meal 

 Argentina 3,110 4,147 5,442 4,549 4,274 4,510 8

 Brazil 1,859 2,499 3,894 3,618 3,553 3,963 16

 United States 18 46 224 133 433 165 56

 India 1 4 117 44 19 143 170

 Norway 37 48 64 67 66 71 14

 All other 26 39 83 109 135 109 33

 Total 5,051 6,783 9,824 8,520 8,479 8,960 12

Soybean oil 

 Argentina 105 171 503 108 309 393 30

 Brazil 371 502 593 196 47 188 –13

 Russia 0 1 30 62 125 132 (

a

)

 Norway 36 53 83 47 64 87 19

 Serbia 4 26 46 28 37 56 70

 United States 9 6 2 1 2 2 –26

 All other 9 10 14 32 71 95 60

 Total 535 768 1,272 475 655 953 12

Source: GTIS, Global Trade Atlas database (accessed April 10, 2012). 

Note: Totals may not add due to rounding. 

a

Not applicable. 

 
6-24 

TABLE 6.16 EU-27: Soybean production, consumption, exports, and imports, MY 2006/07–2010/11 

2006/07 2007/08 2008/09 2009/10 2010/11 

Average

annual change 

2006/07–2010/11

1,000 mt Percent

Soybeans 

 Production 1,228 723 639 836 1,048 ‒4

 Consumption 16,087 16,113 14,086 13,382 13,465 ‒4

 Crush ratea (%) 86 88 88 90 87 (

b

)

 Exports 47 37 22 36 55 4

 Imports 15,180 15,129 13,213 12,429 12,465 ‒5

 Trade balance –15,133 –15,092 –13,191 –12,393 –12,410 (

b

)

Soybean meal 

 Production 11,550 11,715 10,131 9,880 9,675 –4

 Consumption 33,228 35,169 31,579 30,138 30,722 –2

 Exports 552 424 467 472 606 2

 Imports 22,207 24,449 20,993 20,730 21,714 –1

 Trade balance –21,655 –24,025 –20,526 –20,258 –21,108 (

b

)

Soybean oil 

 Production 2,670 2,710 2,350 2,280 2,236 –4

 Consumption 3,408 3,422 2,749 2,397 2,794 –5

 Exports 243 334 399 387 456 17

 Imports 977 1,036 794 550 905 –2

 Trade balance –748 –706 –394 –156 –449 (

b

)

Source: USDA, FAS, PSD Online database (accessed February 2, 2012). 

 aThe crush rate is the share of total domestic supply that is crushed into meal and oil. bNot applicable. 

the negative perceptions many EU consumers have of GM food products.119 Soybean oil 

derived from GM soybeans is used in biodiesel production. 

Competition with the United States 

The United States and Brazil compete directly in the EU-27 market, where the vast 

majority of soybeans are crushed into meal for use in livestock feed, along with other 

types of oilseed meals. For direct human consumption, conventional soybeans and 

products are used. In this narrow segment, Brazil’s current ability to provide conventional 

soybeans and traceability at a reasonable cost gives it a competitive advantage over the 

United States in the EU-27 market. 

Brazil’s advantage in the EU-27 is related to the EU-27 preference for conventional 

soybeans. Brazil’s major soybean-producing areas remained relatively free of GM seeds 

until the early 1990s, thus enabling Brazil to strengthen its position in the EU-27 market. 

In addition, the EU-27 blocked soybean shipments from the United States in 2009 

because they contained traces of GM corn not yet approved in the EU-27, and the EU-27 

has a zero tolerance policy for unauthorized biotech events. Though several of the biotech 

events in question were subsequently approved by the EU-27, USDA indicates that the 

 119 Since the late 1990s, the EU-27 has required that products containing or derived from GM 

organisms be labeled as such. Although the U.S. soybean industry maintains that this and other policies 

affecting GM soybeans act as a barrier to U.S. soybean exports to the EU-27, USITC staff was not able to 

estimate the effects of these policies in its model simulation found in chapter 11 of the report because no 

price gaps relating to nontariff measures for these products were found in 2010. 
6-25 

policy has made importers generally hesitant to purchase soybeans from the United 

States.120 

The United States competes directly with Brazil and Argentina for exports of soymeal to 

the EU-27. Both the United States and Brazil are at a competitive disadvantage with 

Argentina for EU-27 market share, owing to Argentina’s differential export tax on 

soybean products (box 6.1). In addition, soybeans from all sources, including the United 

States and Brazil, that are used as inputs into the biodiesel industry in the EU-27 may not 

qualify in the future for EU tax credits and use mandates because of two Renewable 

Energy Directive (RED) requirements implemented in April 2009. The RED seeks to 

increase the use of renewable energy in the EU-27, including biodiesel fuel. To be 

eligible for EU tax credits and use mandates, the RED requires that biofuels reduce 

emissions of greenhouse gases a minimum of 35 percent, compared to petroleum diesel, 

by 2013; 50 percent by 2017; and 60 percent by 2018. The EU set the amount of 

greenhouse gas savings that soy biodiesel must meet at 31 percent, short of the 35 percent 

required, disqualifying soy from benefits when used as a feedstock for biodiesel in the 

EU-27. However, analysis conducted in the United States, using the EU’s Joint Research 

Centre methodology with U.S. data, shows actual emissions savings from soybean oil in a 

range of 41 to 57 percent.121 In 2011, RED requirements in effect in Germany and Austria 

distorted traditional trading patterns as Germany imported GM soybeans from non-EU-27 

suppliers, crushed them, and exported the soybean oil to other EU member states for 

biodiesel production.122 U.S. trade data for 2011 indicate that U.S. exports of soybeans to 

the EU-27 fell 28 percent by value and 41 percent by volume in that year compared to 

2010.123 

Japan 

Market Characteristics 

Japan is the third-largest global market (by value) for whole soybeans, and the United 

States and Brazil are its number one and number two suppliers respectively.124 Japan 

imported approximately 2.8 million mt of soybeans, a total value of $1.8 billion, in 2011 

(table 6.17). In 2011, the United States supplied 65 percent of Japan’s soybean imports, 

while Brazil held a 17 percent market share. 125 While the bulk of Japan’s imported 

soybeans and soy meal goes into animal feed, Japan imports some high-quality beans to 

process into tofu and other traditional Japanese foods. Japan is not a large market for 

soybean oil. 

 120 USDA, FAS, EU-27 Soybean Imports from the United States Still Impeded, November 3, 2009. 121 ASA, “EU Renewable Energy Directive,” n.d. 122 USDA, FAS, EU-27: Oilseeds and Products Annual, April 7, 2011. 123 Although RED policies may have created a nontariff measure (NTM) for U.S. soybean exports in 

2011, the USITC model simulation in chapter 11 is based on 2010 trade data, when no trade-distorting NTMs 

in the form of relevant price gaps were found to be present in U.S. soybean trade. 124 GTIS, Global Trade Atlas database (accessed April 10, 2012). 125 Ibid. 
6-26 

BOX 6.1 Argentina’s Differential Export Tax 

Argentina is the leading global exporter of soybean meal and soybean oil.a

 The government of Argentina maintains a 

tax on exports of soybeans and soybean products which incentivizes the production of beans into meal and oil. The 

differential export tax (DET) is higher on whole soybeans than it is on meal and oil, therefore making it more profitable 

to process soybeans in Argentina for export. Currently, the DET for soybeans is 35 percent, while the DET for 

soybean meal and oil is 32 percent.b The 3 percent differential between the two taxes translates into a benefit of 

approximately $10 per metric ton on meal and oil exports,c

 enough to cover the variable cost of crushing.d If 

Argentina were to remove its DETs, industry representatives estimate that the United States would be able to ship an 

additional 2 to 3 million mt of soybean meal to the EU-27.e

Argentina’s DETs have helped to encourage large processing companies to invest in crushing facilities there. 

Crushing plants in Argentina are located strategically along a waterway, facilitating exports. Large processing plants 

also create economies of scale, making each processed bean marginally less expensive.f These investments have 

been calculated to benefit Argentina by approximately $6.60 per metric ton.g

Argentina has another advantage with regard to the export of soybeans and soybean byproducts: there is little 

domestic demand for these products in Argentina. In MY 2009/10, Argentina consumed 30 percent of its soybean oil 

production and only 2.5 percent of its soybean meal production for its chicken, beef, and pork production.h 

Over the past 20 years, Argentina increased its global export market share of soybean oil from 26 percent to 

52 percent and soybean meal from 16 percent to 47 percent. If DETs were eliminated, the U.S. soybean industry 

estimates that it would see additional profits of $500 million per year, and Brazil would see additional profits of 

$300 million per year.i

_____________ a GTIS, Global Trade Atlas database (accessed February 2, 2012). 

b

 LMC International Ltd, Impact of Argentina’s System of Differential Export Tax Rates, 2010. c

 LMC International Ltd, Impact of Argentina’s System of Differential Export Tax Rates, 2010. d Industry representative, interview by USITC staff, Washington, DC, June 2, 2011. e Industry representative, interview by USITC staff, Washington, DC, June 2, 2011. f Industry representative, interview by USITC staff, Washington, DC, June 2, 2011. 

 g LMC International Ltd, Impact of Argentina’s System of Differential Export Tax Rates, 2010. h This compares to domestic consumption of 80 percent of soybean oil production and 73 percent of soybean meal 

production in the United States, and 78 percent of soybean oil production and 49 percent of soybean meal production 

in Brazil. USDA, FAS, PSD Online (accessed December 5, 2011). 

 i LMC International Ltd., Impact of Argentina’s System of Differential Export Tax Rates, 2010.

 
6-27 

TABLE 6.17 Japan: Soybean imports, by supplier, 2006–11 

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

Million $ Percent

Soybeans 

 United States 979 1,300 1,712 1,190 1,262 1,181 4

 Brazil 104 137 351 263 257 301 24

 Canada 118 147 220 243 261 281 19

 China 79 72 73 43 39 41 –12

 Paraguay (

a

) (

a

) 1 (

a

) 2 2 54

 All other 1 8 2 20 (

a

) 1 –1

 Total 1,282 1,664 2,359 1,742 1,821 1,806 7

Soybean meal 

 India 148 189 443 264 349 605 33

 China 87 179 152 330 350 120 7

 United States 157 156 244 202 212 210 6

 Brazil 31 1 (

a

) 21 31 91 24

 Korea 0 (

a

) 15 19 20 23 (

b

)

 All other 20 226 5 39 18 19 –1

 Total 444 550 860 875 979 1,068 19

Soybean oil 

 Taiwan 2 5 10 5 4 10 38

 United States 14 14 21 15 11 8 –11

 China 33 20 41 25 9 7 –27

 Korea (

a

) (

a

) (

a

) (

a

) (

a

) 4 69

 Argentina (

a

) (

a

) 1 0 0 2 72

 All other 3 5 11 2 1 2 –8

 Total 53 44 84 48 26 34 –9

Source: GTIS, Global Trade Atlas database (accessed April 10, 2012). 

Note: Totals may not add due to rounding. 

a

Less than $500,000. 

b

Not applicable. 

Consumption Patterns and Preferences 

Soybeans and soy-based products have been historically central to the Japanese diet, and 

continue to be as the public becomes increasingly aware of the protein’s health 

benefits.126 Japanese consumption of soybeans was in the 3 to 4 million mt range from 

2006/07 to 2010/11 (table 6.18).127 Japan does not have a large crush capacity, importing 

oil and meal when needed instead of whole soybeans. However, edamame, which are 

boiled whole soybeans, are a popular snack food in Japan, and whole soybeans are 

imported for this use. Overall, food use accounts for 25 percent of soybean imports into 

Japan, as soybeans are used to make staple foods such as tofu, miso, and soy sauce.128

Tofu can be made from soybean meal or whole soybeans, and accounts for 49 percent of 

total food soybean use.129

 

 126 USDA, FAS, Japan: 2010 Update, April 13, 2011. 127 USDA, FAS, PSD Online (October 20, 2011). 128 USDA, FAS, Japan: 2010 Update, April 13, 2011. 129 USDA, FAS, Japan: 2011 Update, May 13, 2011. The only soy product destined for human use that 

does not require food-grade beans is soy sauce. USDA, FAS, Japan: 2010 Update, April 13, 2011. 
6-28 

TABLE 6.18 Japan: Soybean production, consumption, exports, and imports, MY 2006/07–2010/11 

2006/07 2007/08 2008/09 2009/10 2010/11 

Average

annual change 

2006/07–2010/11

1,000 mt Percent

Soybeans 

 Production 225 225 262 223 220 –1

 Consumption 4,310 4,218 3,752 3,584 3,255 ‒7

 Crush ratea (%) 64 64 64 62 62 (

b

)

 Exports 7 5 0 0 0 0

 Imports 4,094 4,014 3,396 3,401 2,917 ‒8

 Trade balance –4,087 –4,009 –3,396 –3,401 –2,917 (

b

)

Soybean meal 

 Production 2,245 2,218 1,917 1,820 1,591 –8

 Consumption 3,921 3,945 3,846 3,865 3,804 –1

 Exports 0 0 0 0 0 0

 Imports 1,737 1,747 1,812 2,106 2,208 6

 Trade balance –1,737 –1,747 –1,812 –2,106 –2,208 (

b

)

Soybean oil 

 Production 534 528 456 432 378 –8

 Consumption 577 573 536 459 403 –9

 Exports 0 0 0 3 0 0

 Imports 50 42 39 29 19 –22

 Trade balance –50 –42 –39 –26 –19 (

b

)

Source: USDA, FAS, PSD Online database (accessed February 2, 2012). 

 aThe crush rate is the share of total domestic supply that is crushed into meal and oil. bNot applicable. 

Annual Japanese consumption of soybean meal was just under 4 million mt during 

2006/07–10/11. However, meal imports have increased, due to a decline in Japan’s small 

crushing capacity and resultant reduction in domestic soybean meal supply. 130 Only 

11 percent of soybean meal in Japan is used for food consumption, as 89 percent goes 

into animal feed.131 Consumption of soybean oil was steady during 2006/07–07/08, but 

declined in subsequent years as the price of rapeseed oil became more favorable in the 

Japanese market.132 Palm oil is the major vegetable oil imported into Japan, and high 

tariffs on soybean oil limit imports from major global suppliers. 

Competition with the United States 

The United States is the principal supplier to the Japanese market, shipping more than 

three times as many soybeans there in 2011 than Brazil, Japan’s the second-largest 

supplier. In addition to the historically strong economic and diplomatic relationship the 

United States and Japan have shared, which contributed to the United States’ place as 

principal supplier of soybeans to Japan dating back to the 1950s, today the quality of U.S. 

soybeans and flexibility in shipping arrangements favor the United States in the Japanese 

market over Brazil.133 Japanese consumers also prefer the golden color of U.S. soybeans 

for certain food-grade applications over the reddish color of Brazilian soybeans.134 A 

 130 USDA, FAS, Japan: 2010 Update, April 13, 2010. 131 USDA, FAS, Japan: 2011 Update, May 13, 2011. 132 USDA, FAS, Japan: 2010 Update, April 13, 2010. 133 Industry representative, interview by USITC staff, Washington, DC, June 2, 2011; HighQuest 

Partners and SoyaTech, How the Grain and Oilseed Trade Works, 2008, 14. 134 Ibid., 60. 
6-29 

portion of U.S. soybean exports to Japan consists of conventional soybeans, because 

Japan mandates that all food-grade soybeans (such as those for tofu and edamame) be 

non-GM. U.S. conventional soybean growers in various U.S. states, including Ohio, 

Iowa, southern Illinois, and Missouri, take advantage of this niche market shipping 

smaller volumes in containers, at times enjoying favorable shipping rates on containers 

that otherwise would have made the return trip to Asia empty.135

 

 135 Industry representative, interview by USITC staff, Washington, DC, March 15, 2012. 
6-30 

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———. 2011/12,” May 2011. 

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———. “The Green Revolution,” 2011. http://www.fao.org/kids/en/revolution.html.
6-31 

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da lavoura permanente (vide Nota de Rodapé),” n.d. 

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2011). 

———. “Tabela 1618, “Área plantada, área colhida e produção, por ano da safra e produto (vide Nota de 

Rodapé),” n.d. http://www.sidra.ibge.gov.br/bda/tabela/listabl.asp?z=t&o=26&i=P&c=1618

(accessed October 4, 2011). 

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Cost Comparison.” Ag Decision Maker, December 2001. 

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Commercialization in Brazil.” News release, August 20, 2010. 

http://monsanto.mediaroom.com/index.php?s=43&item=875. 
6-32 

Moreira, Mauricio Mesquita, Christian Volpe, and Juan S. Blyde. Unclogging the Arteries: The Impact of 

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_Volpe_Blyde.pdf. 

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———. “Conventional Soybeans Gaining Acreage in Mato Grosso,” September 22, 2011. 

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———. “GMO Crop Varieties Find Path to Approval in Brazil,” October 13, 2011. 

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Higher-Than-Us. 

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6-33 

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6-34 

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7-1 

CHAPTER 7 

Grains 

Overview 

Brazil is a major global producer, consumer, and trader of cereal grains.1 Corn is by far 

Brazil’s most important grain crop, accounting for 78 percent of Brazil’s grain production 

and 85 percent of its grain exports on average between marketing year2

 2006/07 and 

2010/11. Although the Brazilian corn industry does not have the same scale and 

efficiencies as the United States, it has become an important secondary supplier in the 

international market. Wheat is also produced in large quantities, accounting for 6 percent 

of Brazil’s grain production and 8 percent of its grain exports over the same time 

period.3

 Brazil’s wheat exports are typically lower in quality than those of the United 

States, and are more likely to compete with corn or other feed grains in third-country 

markets. 

As the most heavily exported grains in Brazil, corn and wheat are the focus of this 

chapter. Brazilian farmers do produce other grains, such as rice, sorghum, barley, rye, 

and oats, but these products are sold primarily on the domestic market and the industries 

are generally not as export-oriented.4

 Given Brazil’s natural endowments and available 

land, there is potential for expanding the production of rice, sorghum, barley, rye, and 

oats as technologies improve and better infrastructure aids in the development of 

integrated domestic and international markets. But because of strong demand for grains 

within Brazil, only corn and wheat are likely to compete for sales in global export 

markets in the foreseeable future. 

Corn 

Global Trade in Corn 

Corn production and consumption has increased significantly over the last five years as 

more corn is used for ethanol production and animal feed.5

 The international corn market 

has many diverse importers, but only a few significant suppliers. The United States is the 

world’s most important corn producer, accounting for about 40 percent of global 

production and more than half of the world’s exports. However, the U.S. share of global 

exports has fallen in recent years as a larger percentage of U.S. corn supplies are being 

 1

 Grains can be defined as agriculturally grown cereals and are found in chapter 10 of the Harmonized 

Tariff Schedule of the United States. 2

 The marketing year is a 12-month period, usually beginning with a new harvest, during which the 

product is marketed. Marketing years differ for each commodity and country. 3

 USDA, FAS, PSD Online (accessed January 23, 2012). 

4

 Sorghum is most commonly used as an animal feed in Brazil, and it can be substituted for corn in 

rations, but too little is produced for it to be a major factor in foreign animal feed markets. 5

 USDA, FAS, PSD Online (accessed January 23, 2012). 
7-2 

used for U.S. ethanol production, which has allowed other suppliers, such as Brazil, to 

increase their presence in the international market.6

 

Global corn price levels have risen considerably since 2006 due to a number of global 

economic conditions.7

 However, global demand continues to increase. With the United 

States providing a smaller share of exports for the international market, production and 

exports in other major producing countries have increased.8

 Brazil, in particular, has 

taken advantage of its ample natural resource base to expand production substantially and 

become an important exporter, particularly for countries trying to diversify their corn 

supply, markets interested in non-genetically modified (GM) corn varieties (most notably 

the European Union (EU-27)), and price-sensitive markets. 

The Brazilian Corn Industry 

Brazil is one of the world’s largest corn-producing and -exporting countries, owing to its 

large tracts of arable land, ability to grow more than one crop per year in several 

production regions, and relatively low field costs (table 7.1 and 7.2). Over the past five 

years, Brazilian corn production grew about 3 percent annually, largely because of 

increased double-cropping of corn (planted after the soybean harvest in the tropical 

Center-West) as well as the application of more intensive farm management practices, 

such as improved seed and fertilizer use.9

 Corn production will likely increase in the 

future, primarily because of improved yields, but also because of expanded acreage (tied 

to increased soybean production). However, marketing channels are still developing as 

infrastructure evolves and domestic livestock industries expand. Even with Brazil’s 

infrastructure investments, which lower transportation costs, and the increasing supply of 

corn available for export, the United States will likely remain the largest global corn 

exporter for the foreseeable future. 

TABLE 7.1 Brazil: Corn production, consumption, exports, and imports, marketing years (MY) 2006/07–2010/11 

Item 2006/07 2007/08 2008/09 2009/10 2010/11 

Average 

annual change 

2006/07–10/11

1,000 mt Percent

Production 51,000 58,600 51,000 56,100 57,500 3.0

Consumption 41,000 42,500 45,500 47,000 49,500 4.8

Exports 8,071 7,883 7,178 8,623 11,583 9.5

Imports 1,204 961 1,092 699 474 –20.8

Trade balance 6,867 6,922 6,086 7,924 11,109 12.8

Source: USDA, FAS, PSD Online database (accessed January 23, 2012). 

 

 6

 USDA, USDA Agricultural Projections to 2020, February 2011. 7

 Trostle et al., “Why Have Food Commodity Prices Risen Again?” June 2011. 8

 USDA, FAS, PSD Online (accessed January 23, 2012). 

9

 Double-cropping involves multiple crop plantings and harvest on the same land in the same year. In 

Brazil, corn is planted immediately after soybeans are harvested. Corn double-cropping with soybeans is not 

possible in the United States because of the shorter U.S. growing season. However, double-cropping with 

winter wheat as the first crop and soybeans as the second crop is practiced in certain U.S. states. 

USDA, NASS, Acreage, June 30, 2011. 
7-3 

TABLE 7.2 Corn: Production, consumption, and trade, selected producers and markets, 2010/11 (1,000 mt)

Country Production Consumption Exports Imports Trade balance

Producers 

 United States 316,165 285,005 45,254 684 44,570

 China 177,245 176,000 111 979 –868

 Brazil 57,500 49,500 11,583 474 11,109

 EU-27 55,795 62,500 1,078 7,359 –6,281

 Argentina 22,500 7,100 15,000 7 15,152

 All other 198,147 262,418 18,614 80,387 –70,831

 Total 827,352 842,523 91,640 89,890 –

Selected major markets 

 Japan 1 15,600 0 15,655 –15,665

 Korea 74 8,223 0 8,107 –8,107

 Mexico 21,130 28,700 100 8,000 –7,900

 Egypt 6,500 12,100 10 5,400 –5,390

 Taiwan 38 4,325 0 4,200 –4,200

 Colombia 1,450 5,200 0 3,504 –3,504

 Subtotal 29,193 74,148 110 44,866 –44,756

Source: USDA, FAS, PSD Online (accessed January 23, 2012). 

Although the volume of U.S corn exports was more than six times that of Brazil during 

2006-11, there is direct competition between the two in certain third-country markets. In 

coming years, strong growth in global demand for corn and other feed grains may offer 

opportunities for both countries to expand production and exports. However, Brazil is 

unlikely to achieve the same corn production volumes and efficiencies as the United 

States, primarily because the climate and increasing role of corn in Brazil as a secondharvest crop result in relatively lower yields. Additionally, rising corn demand from 

Brazil’s domestic livestock industries will likely restrict supplies available for export. 

These factors are compounded by poor transportation infrastructure, particularly for the 

interior regions, and the detrimental effects of an appreciating currency common to other 

agricultural products in Brazil, which raise the delivered cost of Brazilian corn. However, 

Brazil will remain an important secondary supplier to the world market, with the 

possibility of increasing market shares in several countries where the United States has a 

presence. 

Brazilian Production, Consumption, and Trade 

Much of Brazil’s increased prominence in the global corn market stems from its dramatic 

production growth in recent years. Corn production in Brazil increased 13 percent 

between 2006/07 and 2010/11, rising from 51 million metric tons (mt) to 58 million mt.10

While its output is considerably smaller than that of the United States, Brazil was the 

third-largest corn producer in the world in 2010/11 and the largest in the Southern 

Hemisphere (table 7.3). Brazilian corn production has increased steadily over the past 

30 years. However, recent production has plateaued after a significant production jump 

between 2005/06 and 2007/08. This jump coincided with strong global prices and low 

inventories worldwide during that period, which made corn economically attractive to 

Brazilian producers.11

 10 USDA, FAS, PSD Online (accessed January 23, 2012). 

11 USDA, FAS, Brazil: Grain and Feed; Grain Annual, 2007, March 20, 2007, 4. 
7-4 

2

2.5

3

3.5

4

4.5

5

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

MT/ha

1,000 ha

Harvested Area Yields

Source: USDA, FAS, PSD Online (accessed January 23, 2012).

TABLE 7.3 World corn production, MY 2006/07–2010/11

2006/07 2007/08 2008/09 2009/10 2010/11 

Average

annual change

2006/07– 2010/11

 1,000 mt Percent

United States 267,503 331,177 307,142 332,549 316,165 11

China 151,600 152,300 165,914 163,974 177,245 4

Brazil 51,000 58,600 51,000 56,100 57,500 3

EU-27 53,829 47,555 62,321 56,947 55,795 1

Argentina 22,500 22,017 15,500 23,300 22,500 0

Mexico 22,350 23,600 24,226 20,374 21,130 –1

India 15,100 18,960 19,730 16,720 20,500 8

South Africa 7,300 13,164 12,567 13,420 10,924 11

All other 122,849 127,325 140,751 135,850 145,593 4

 Total 714,031 794,698 799,151 819,234 827,352 4

Source: USDA, FAS, PSD Online (accessed January 23, 2012). 

Note: Totals may not add due to rounding.

Higher Brazilian corn production over the past 10 years can be primarily attributed to 

yields that rose by almost 30 percent between 2000/01 and 2010/11. Harvested area also 

trended upward, but to a lesser degree, contributing to the overall production growth 

(figure 7.1). Increased investment in seed and fertilizer improved yields and increased 

production, particularly in regions where corn is a secondary crop.12 However, yields 

remain below the global average and below those of several major exporting countries.13

Improving yields will be important for realizing the productive capacity of Brazil’s corn 

industry and will be determined by multiple competitive factors addressed throughout 

this chapter. 

 

 12 Brazilian Meat Monitor, “FEED News,” June 10, 2011, 18. 13 For example, between 2008/09 and 2010/11 yields in Canada (9.05 mt/hectare) and the United States 

(9.86) were more than double Brazil’s yield (4.03). Yields in the EU-27 (6.98), neighboring Argentina (8.17), 

and China (5.32) were also higher. USDA, FAS, PSD Online (accessed May 12, 2011). 

FIGURE 7.1 Brazilian corn harvest area and yield, MY 2000/2001–2010/11 
7-5 

The growth in Brazil’s livestock and poultry sectors is the most important factor driving 

Brazilian domestic corn demand and the amount available for export.14 During 2006/07–

2010/11, use of corn for feed rose by 23 percent, reflecting increased production of 

poultry and pork. During this period, feed prices (primarily corn and soybean meal) were 

sufficiently stable to facilitate expansion of the hog and broiler industries.15 While cattle 

production primarily relies on pasture and forage, feedlots are becoming more common 

and, as a result, the use of corn in beef production is increasing.16 However in late 2010, 

corn prices rose to the point where they have become a concern for the livestock and 

poultry industries, creating greater competition between Brazilian domestic needs and 

corn exports.17

Brazilian corn exports rose strongly over the past decade and were three times larger in 

2010/11 than in 2000/01. 18 In 2010/11, Brazil was the world’s third largest cornexporting country, with almost 12 million mt exported. Brazil still accounts for only 

about 10 percent of global exports—far behind the United States, which supplies more 

than one-half of global exports. However, Brazil has almost closed the gap with 

Argentina, the world’s second leading exporter (15 million mt in 2010/11) and is ahead 

of Ukraine (5 million mt). 

Much like the increase in production, the dramatic rise in exports after 2006/07 coincided 

with a period of high world prices and low global inventories. 19 As domestic 

consumption continues to increase, it is uncertain whether Brazil will be able to sustain 

the same level of export growth in the future.20 However, USDA expects that over the 

next 10 years Brazil’s exports will at least remain relatively stable.21

In addition to increasing its overall exports, Brazil has increasingly diversified the 

markets it serves (table 7.4). Before 2007, Brazil did not have many well-developed 

relationships with overseas customers; corn was marketed overseas from year to year, 

depending on whether Brazil had product available and whether consuming countries 

faced supply shortfalls. However, as exports began to increase in 2006 and 2007, trade 

patterns shifted. Brazil began exporting to new markets and increased quantities to 

existing markets. For example, corn exports to Taiwan increased from zero in 2006 to 

$326 million in 2011, making Taiwan Brazil’s third-largest export market that year. 

 14 USDA, FAS, PSD Online (accessed January 23, 2012). 

15 USDA, FAS, Brazil: Poultry and Products; Annual Poultry Report, September 27, 2009, 2; USDA, 

FAS, Brazil: Livestock and Products Annual; Annual Livestock Report, September 22, 2009, 8. 16 USDA, FAS, Brazil: Livestock and Products Annual, August 16, 2011, 5. 17 CEPEA, “Indicador de preços” [Price indicator] (accessed September 28, 2011); USDA, FAS, 

Brazil: Livestock and Products Annual, August 16, 2011, 5; Brazilian Meat Monitor, “FEED News,” 

June 10, 2011, 2; see also chapter 9. 18 USDA, FAS, PSD Online (accessed January 23, 2012). 

19 USDA, FAS, Brazil: Grain and Feed; Grain Annual, 2007, March 20, 2007, 4. 20 USDA, FAS, Brazil: Grain and Feed Annual; Annual Report, March 16, 2011, 4. 21 USDA, OCE, USDA Agricultural Projections to 2020, February 2011. 
7-6 

TABLE 7.4 Brazil: Corn exports to selected markets, 2006–11 (million $)

 2006 2007 2008 2009 2010 2011

Iran 205 436 90 283 276 526

Taiwan 0 0 35 120 220 326

EU-27 118 1,273 799 50 319 279

Japan (a

) 10 (a) 44 116 226

Algeria 0 0 14 44 86 192

Morocco 0 0 31 68 187 164

Malaysia 0 0 56 130 186 157

Colombia 3 1 55 128 152 113

Saudi Arabia 1 16 68 99 167 108

Indonesia 0 0 0 4 86 53

All other 154 183 258 332 63 573

 Total 482 1,919 1,405 1,302 2,216 2,716

Source: GTIS, Global Trade Atlas database (accessed January 31, 2012). 

Note: Totals may not add due to rounding. 

a

Less than $500,000.

Several factors underlie Brazil’s increased role in international markets. First, higher 

global demand and world prices spurred increased corn production and exports 

worldwide in 2007/08, and Brazil was no exception. Second, domestic policy in the 

United States increased the amount of U.S. corn used for ethanol, decreasing the amount 

of U.S. supplies available for exports. Importing countries were interested in diversifying 

their suppliers to ensure domestic demands were satisfied, and Brazil was well positioned 

to serve those markets, with land and other resources enabling it to significantly increase 

its production.22 Third, Brazil is able to provide non-GM exports, particularly to the 

EU-27, Korea, and Japan, owing to Brazil’s relatively large use of non-GM seed and the 

availability of segregated marketing channels in Brazil similar to those it has for non-GM 

soybeans (see chapter 6).23 Lastly, short-term weather-induced grain supply shortages in 

Eastern Europe and export bans in Russia created global grain shortages in late 2010.24

This increased the value of Brazilian corn exports by raising the price and volume Brazil 

shipped as importers searched for new suppliers. 

Industry Structure 

Farm and Industry Organization 

Corn production systems in Brazil differ by region within the country. For example, corn 

operations encompass the large-scale farming typically found in the Center-West states, 

the small and medium-scale farms in the South that are members of cooperatives, and the 

subsistence farming found primarily in the North and Northeast states. 25 Production 

 22 USDA, FAS, Brazil: Grain and Feed; Grain Annual, 2007, March 20, 2007, 4–5; government 

official, interview by USITC staff, Brasilia, Brazil, August 2011. 23 USDA, FAS, Brazil: Grain and Feed; Grain Annual, 2007, March 19, 2008, 5; USDA, FAS, Brazil: 

Grain and Feed; Grain Annual, 2007, March 20, 2007, 5. 24 USDA, ERS, Wheat Outlook, September 14, 2010, 4. 25 Government official, interview by USITC staff, Brasilia, Brazil, August 24, 2011. 
7-7 

growth centered in the Center-West region means that Brazilian corn is increasingly 

supplied by large-scale, efficient operations.26

Farms in the Center-West average more than four times the area of farms in Southern 

states, and commercial farms in the Center-West are significantly larger than most U.S. 

commercial farms.27 For example, the average farm size in the Center-West state of Mato 

Grosso is 126 hectares (ha) (311 acres), compared with 24 ha (59 acres) in the Southern 

state of Paraná.28 However, in the Center-West, large row-crop operations can have as 

many as 225,000 ha (556,000 acres) of owned, leased, and rented land in production.29

These operations are generally independent, commercial operations with sophisticated 

management structures. Operations in Southern states are typically smaller, averaging 

under 100 ha (247 acres), and individually they are unable to acquire large-scale, efficient 

machinery and equipment.30 However, by organizing into cooperatives, farmers in this 

region are able to achieve efficiencies of scale for their production and marketing.31 In 

comparison, farms in the U.S. average about 180 ha (444 acres), with large commercial 

Midwestern farms typically operating on 400 to 800 ha (988 to 1,976 acres).32

Regional Production 

As production spread from the South and Southeastern states to the Center-West, Brazil’s 

export competitiveness in corn changed because of regional differences in productivity, 

transportation costs, and marketing (table 7.5).33 The state of Paraná, located in the South, 

is still the single largest corn-producing state, generally supplying about one-quarter of 

Brazil’s domestic production. 34 When the output of other traditional corn-producing 

states, including Minas Gerais, Rio Grande do Sul, and São Paulo, is included, southern 

Brazil accounted for nearly 60 percent of production in 2006/07. However, like soybean 

production, the production of corn grew strongly in the Center-West and the Northeastern 

state of Bahia, which together now account for more than one-third of national 

production.35 By 2010/11, Mato Grosso had become the second-largest corn-producing 

state, accounting for 15 percent of national production and 70 percent of exports 

(figure 7.2).36 However, the Center-West and Northeast production regions are further 

from ports than the traditional production areas and therefore have higher transport costs 

(see discussion later in the chapter). 

 

 26 Magalhaes and Diao, “Productivity Convergence in Brazil,” April 2009, 3; Contini and 

Reifschneider, “Agribusiness: Innovation and Competitiveness in Brazil,” 2009, 90. 27 IBGE, Census of Agriculture 2006 (accessed October 4, 2011). 28 Ibid. 

29 Industry representatives, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 30 Industry representatives, interview by USITC staff, Paraná, Brazil, August 29, 2011. 31 Contini and Reifschneider, “Agribusiness: Innovation and Competitiveness in Brazil,” 2009, 90. 32 USDA, NASS, Farms, Land in Farms, and Livestock Operations: 2006 Summary, February 2007. 33 IBGE, Municipal Agricultural Production and SIDRA databases. 34 Ibid. 

35 Ibid. 

36 ANEC, “Evolucão das exportacões por estado, 2011” [Export trends by state, 2011], n.d. (accessed 

January 23, 2012).
7-8 

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2003 2004 2005 2006 2007 2008 2009 2010

Source: IBGE, Municipal Agricultural Production and SIDRA databases (accessed July 14, 2011).

FIGURE 7.2 Mato Grosso corn production, 2003‒10 (1,000 mt)

TABLE 7.5 Brazil: Corn production by region, 2006–10 

2006 2007 2008 2009 2010 

Average annual 

change 2006–10

Million mt Percent

South 18,733 24,112 25,029 18,816 22,927 5

Center-West 10,102 13,522 16,902 15,627 17,046 14

Southeast 9,556 10,279 11,312 11,096 10,646 3

Northeast 3,168 3,128 4,427 4,799 4,145 7

North 1,102 1,070 1,264 1,274 1,296 4

 Total 42,662 52,112 58,933 51,612 56,060 7

Source: IBGE, Municipal Agricultural Production and SIDRA databases (access July 14, 2011). 

 

The shift in regional production also affects national productivity rates because of lower 

yields in the expansion areas.37 The best corn-yielding areas in the world are found at 

higher latitudes than the interior of Brazil and have relatively moderate climates and wide 

daily temperature ranges, as opposed to the Center-West of Brazil, which is more 

tropical, with hotter nights. Another reason that yields are higher in southern Brazil is that 

farms there have more experience growing and marketing corn than do the newer 

operations in the Center-West.38

Two-Harvest Production System 

A major distinction between Brazilian and U.S. production is the ability of Brazilian 

farmers to grow corn as a second crop in many areas. This gives Brazil an important 

competitive advantage, because more food and fiber can be produced from a single unit 

 37 For example, average yields in Paraná are about 20 percent higher than those in Mato Grosso. IBGE, 

SIDRA databases. 38 Industry representatives, interview by USITC staff, Paraná, Brazil, August 29, 2011. 
7-9 

of land. As more corn is produced in the tropical Center-West, an increasing share of it is 

grown in this second harvest season (also known as the “safrinha” or “little harvest”).39

Between 2006/07 and 2010/11, the share of annual corn output that was produced during 

the second harvest jumped from 26 percent to 41 percent. 40 As the expansion of 

Center-West cropland slows, future growth in Brazilian corn production will rely more 

on improving yields of safrinha corn. 

Planting a second corn crop has important agronomic benefits to the soybean crop in 

Brazil.41 Since the early 2000s, planting corn after the soybean harvest has helped to 

protect against soybean rust and improved productive soil capacity.42 But soybeans are 

the primary source of revenue for many farmers, who make farm management decisions 

for corn—such as the timing of planting and harvest, or the timing and amount of 

fertilizer applications—while considering the needs of their soybean crop and the overall 

profitability of the farm operation.43 Particularly in the Center-West, farmers maximize 

profits by applying fewer inputs to their corn crops, even though this practice leads to 

lower yields. 

Corn also competes with cotton for acreage in some areas of the Center-West, and 

because world cotton prices have risen in recent years, Brazilian producers have allocated 

more planted area for cotton.44 Cotton is most commonly planted during the second 

harvest season. However, when prices are high enough, some farmers plant cotton as 

their primary crop to ensure better yields, although in doing so, farmers forgo a second 

crop because cotton has a longer growing cycle than soybeans. 45 In either situation, 

cotton production supplants corn plantings. 

Primary Factors Affecting Competitiveness 

There are a number of factors that distinguish Brazil’s corn industry from that of the 

United States; these factors affect Brazil’s ability to supply the international market. On 

one hand, Brazil benefits from relatively low field costs, which are the primary reason 

Brazil is a growing exporter of corn in spite of high infrastructure costs and a 

strengthening currency. On the other hand, export demand for Brazilian corn must 

compete with domestic demand by Brazil’s livestock sector, which is growing rapidly 

and becoming more efficient. Ultimately, the competitiveness of Brazilian corn exports 

 39 IBGE, SIDRA databases. 

40 IBGE, Municipal Agricultural Production and SIDRA databases. 41 The Center-West region is the area where double-cropping is most heavily practiced with corn 

primarily planted as a second crop. A second crop is also commonly planted in northern Paraná and 

southwestern Bahia. In some expansion areas, closer to the Atlantic, the rainy season is too short to sustain a 

second harvest. On farms that practice double-cropping, the second crop is generally planted immediately 

after soybeans are harvested in January or February, and harvest is typically between June and July. 42 USDA, FAS, Brazil: Oilseeds and Products; Annual Soybean Report, 2008, May 27, 2008, 20–22; 

Brazilian Meat Monitor, “FEED News,” May 27, 2011, 17. 43 There are cases where soybean management decisions are influenced by the needs of corn 

production, such as farmers spraying defoliant on soybeans to speed their maturation so that they can be 

harvested in time for corn-planting season. The defoliation lowers soybean yields. The main objective for 

farmers is generally to maximize profits for the entire year, rather than one harvest versus the other. Industry 

representative, interview by USITC staff, Mato Grosso, Brazil, August 2011. 44 Industry representatives, interview by USITC staff, Mato Grosso, Brazil, August 2011; USDA, FAS, 

Brazil: Cotton and Products Annual, April 1, 2011, 2. 45 CONAB, “Custo de produção: algodão em caroço” [Production costs: Cotton seed], 2011. 
7-10 

will depend on the development of infrastructure and marketing efficiencies that will 

allow Brazil to take full advantage of its low field costs. 

Cost of Production 

Compared with the United States, corn production in Brazil is cost-competitive at the 

farm gate level (table 7.6).46 Internal transportation costs erode that competitiveness, 

particularly in Mato Grosso, which is further from Atlantic ports. Additionally, Brazil 

generally requires longer shipping routes to many third-country markets than the United 

States, adding to delivered costs. Particularly when world corn prices are high, however, 

Brazilian corn remains competitive, especially corn produced during the first crop in 

southern states because transportation costs are a smaller percentage of the final price. 

TABLE 7.6 Corn: Average 2010/11 costs of production at various R$/$ exchange rates (¢/kg) 

Product 

United 

States 

Heartlanda

Paraná

(first 

crop)

Mato

Grosso

(second

crop)

Paraná

(first 

crop)

Mato 

Grosso 

(second 

crop) 

Paraná 

(first 

 crop) 

Mato

Grosso

(second

crop)

(actual) (actual) 

R$1.76/$1 

 (hypothetical) 

R$1.50/$1 

 (hypothetical) 

R$2.00/$1 

Seed 2.17 1.31 1.14 1.54 1.33 1.16 1.00

Fertilizer 2.70 1.84 1.68 2.16 1.97 1.62 1.48

Chemical inputs 0.77 0.80 0.85 0.93 1.00 0.70 0.75

Labor 0.62 0.24 0.20 0.29 0.24 0.22 0.18

Other operational 1.67 1.63 1.37 1.91 1.61 1.43 1.21

 Total, variable costs 7.94 5.82 5.24 6.83 6.15 5.12 4.61

Land 3.75 1.41 2.20 1.65 2.59 1.24 1.94

Physical capital 2.04 2.28 1.34 2.68 1.57 2.01 1.18

Other fixed costs 0.19 0.58 0.86 0.68 1.01 0.51 0.76

 Total, fixed costs 5.98 4.27 4.41 5.01 5.17 3.76 3.88

 Total, costs 13.92 10.09 9.65 11.84 11.32 8.88 8.49

Farm-to-port freightb 2.99 3.45 11.50 3.45 11.50 3.45 11.50

 Total cost to port 16.91 13.55 21.14 15.29 22.82 12.33 19.99

Source: CONAB, “Custo de Producão” [Production costs], 2011; USDA, ERS, “Commodity Costs and Returns 

Data,” 2010; USDA, AMS, “Brazil Soybean Transportation Report,” December 6, 2010; USDA, AMS, “Grain 

Transportation Indicators,” December 30, 2010. 

 aThis region includes Ohio, Indiana, Kentucky, Illinois, Missouri, Iowa, Nebraska, South Dakota, and Minnesota. bBased on Brazil 4th-quarter 2010 freight rates; USDA, AMS, Brazil Soybean Transportation Report, 2010. For 

United States, based on December 6, 2010 price from USDA, AMS, Grain Transportation Indicators. Unit car rate 

from Champaign-Urbana, IL, to New Orleans, LA.

 46 Both the USDA and Brazil’s National Food Supply Company (Companhia Nacional de 

Abastecimento, or CONAB) publish data on cost of production. The agencies’ accounting procedures differ, 

but comparisons can provide broad insights about which factors are most important in driving production 

costs. The United States’ costs reflect a sample farm that is assumed to produce 10.6 mt per ha. The yield 

assumption for a Paraná farm is 6.8 mt per ha; for Mato Grosso, 5.4 mt per ha. The examples are 

representative of the typical productivity of each region. Improved yields and higher production would 

further reduce land costs on a per kilogram basis. Changing certain variable input factors in Brazil, such as 

using higher-quality seed or more fertilizer, would affect both total per hectare costs and per hectare yields. It 

is important to consider both the cost and revenues produced by more intensive input use when analyzing 

how changing farm management strategies would affect overall competitiveness. 
7-11 

Overall, fixed production costs in Brazil are below those in the United States, and 

Brazil’s farmland is an important reason. This factor benefits Brazilian corn producers in 

two important ways. First, Brazilian farmers face lower land costs than in the United 

States for productive land, whether purchased or rented. Second, the availability of 

inexpensive land for expansion offers significant investment opportunities for farmers.47

Particularly for large operations in Mato Grosso, increasing scale through expansion 

helps to lower costs per unit of output for spending on physical capital, such as buying 

and maintaining machinery and equipment. 

Variable costs are affected by different farming practices. Brazilian corn growers 

typically use lower-quality seeds and less fertilizer than in the United States, so their seed 

and fertilizer costs are much lower in absolute terms. Better seeds and more fertilizer use 

would raise yields, but the additional revenues generated may not be enough to justify the 

extra cost. On the other hand, costs of chemical inputs for pest and disease control are 

higher in Brazil, especially in tropical areas, than in the United States, owing to such 

environmental challenges as the lack of a winter freeze to kill pests and disease 

organisms. Labor cost shares in Brazil are about half those in the United States, although 

labor is a relatively small cost component in both countries. 

Freight costs are a pivotal factor for corn destined for export. Lower field costs in Mato 

Grosso are eroded away by farm-to-port freight costs, which are nearly four times higher 

than those in the United States. This reflects poor infrastructure and a reliance on trucks 

and highways, as opposed to the more efficient system of rail and barges used in the 

United States.48

Table 7.6 is denominated in U.S. dollars for comparison purposes. But exchange rates are 

a dynamic factor that affect cost competitiveness in export markets. They are important 

particularly because Brazilian export sales are predominantly denominated in dollars, 

while costs are denominated in reais. Table 7.6 shows two different exchange rate 

scenarios, both of which have been witnessed in recent years, demonstrating that 

exchange rate fluctuations make a big difference in relative production costs in Brazil and 

the United States. A strong real takes Brazilian corn out of the international market by 

raising its cost above the global price.49 

Land Expansion and Improvement of Farm-Level Inputs 

Soybeans are the primary driver for agricultural expansion into new land. 50 Corn is 

expected to benefit from increased soybean production in the Center-West region, where 

double-cropping is prevalent. But there are limits to how far corn can expand along with 

soybeans. The Northern and Northeastern states of Maranhão, Tocantins, Piauí, and 

 47 The areas of expansion are primarily found in the Center-West and Northeast regions of the country. 

Even in major producing states such as Mato Grosso, there is still new land being developed. CONAB land 

cost estimates are sampled from farms in developed regions within the state, where land values have 

increased over the past three years, and do not necessarily reflect areas that are newly developed or currently 

developing. This helps to explain why land costs are reportedly higher in Mato Grosso than Paraná, only a 

recent circumstance. In addition, lower yields in Mato Grosso compared to Paraná could also raise land costs 

per unit of output. 48 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 49 For more discussion on exchange rates, see chapter 4. 

50 Government official, interview by USITC staff, Brasilia, August 2011. 
7-12 

Bahia offer the most potential for soybean expansion because of their cerrado soils, 

suitable climate, and proximity to Brazil’s northern Atlantic ports. However, the region 

also experiences a longer dry season, which limits the growing season and potential to 

double-crop. 

The use of higher-quality corn seed varieties in Brazil has lagged behind that in the 

United States.51 In the Center-West and Northeast, where production has expanded the 

most in recent years, using corn varieties adapted to the region, primarily through publicprivate partnerships, was crucial for production growth.52 Private seed and biotechnology 

companies, such as Monsanto and Pioneer, now have strong presences as well, marketing 

products that are well suited for Brazilian conditions and farming practices.53 The use of 

GM seed has risen dramatically in recent years, and in 2011/12 over half of the corn 

planted was of GM varieties.54 Approved in Brazil in 2003, GM crops limit potential 

exports to certain markets, particularly the EU-27,55 but have the ability to lower input 

costs and improve margins for growers.56 

More intensive fertilizer use for corn, particularly during the second harvest season, is 

another important input that can improve yields and production. As mentioned in chapter 

4, the majority of fertilizer in Brazil is imported, making it more expensive. 57

Additionally, high transportation costs limit farmers’ ability to adjust fertilizer 

applications based on weather or economic conditions.58 In the Center-West, fertilizer is 

applied only before soybeans are planted. Second-crop corn uses the nutrients remaining 

in the soil after the soybean harvest, lowering the cost of production but also lowering 

yields. However, high domestic and international prices for corn are encouraging 

increased fertilizer use. Increased corn production from higher-quality seeds and more 

intensive use of fertilizer would ease the competition for corn supplies between the 

domestic livestock sector and exports.59

Interaction with the Livestock Sector 

Growth in domestic demand for corn may outstrip production growth and limit the supply 

of corn available for the export market. 60 Poultry and swine are particularly cornintensive, with corn comprising about two-thirds of their rations.61 The recent trend of 

livestock producers locating closer to corn production areas in the Center-West has 

 51 Industry representative, e-mail to USITC staff, June 7, 2011. 52 Contini and Reifschneider, “Agribusiness: Innovation and Competitiveness in Brazil,” 2009, 90. 53 USDA, FAS, Brazil: Grain and Feed Annual; Annual Report, March 16, 2011, 4; industry 

representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 54 Industry representative, e-mail to USITC staff, June 7, 2011. 55 As noted in previous chapters, Brazil has segregated marketing channels for non-GM soybeans, 

which corn producers also use to segment their products. EIU, “The Global Power of Brazilian 

Agribusiness,” November 2010, 11. 56 USDA, FAS, Brazil: Grain and Feed; Grain Update, September 2008, September 30, 2008, 2. 57 USDA, FAS, Brazil: Grain and Feed Annual, March 16, 2011, 5. 58 Industry representative, interview by USITC, Mato Grosso, Brazil, August 28, 2011. 59 Brazilian Meat Monitor, “FEED News,” June 10, 2011, 18. 60 Rabobank International, “Will There Be Any Corn Left?” December 2011. 61 USDA, FAS, Brazil: Grain and Feed Annual, March 16, 2011, 4. 
7-13 

lowered transportation costs and made domestic livestock producers more able to 

compete with international markets for the region’s corn.62 

Prices determine whether Brazilian corn supplies are allocated to domestic or 

international markets. Higher international prices of corn are transmitted to the domestic 

market, resulting in lower margins for livestock producers, higher meat prices, or less 

meat production. In 2008, high international prices drew more corn to export markets, 

forcing livestock producers to pay higher prices to ensure they had enough feed 

supplies. 63 Government programs, such as the Premium for Marketing of Products 

program (see below), have been implemented to enable domestic users to buy Brazilian 

corn without being buffeted by severe fluctuations in price.64

Prices 

The Brazilian market for corn is affected by both domestic and international prices.65 In 

recent years, steep increases in global corn prices have led to higher domestic production 

and to surges in Brazilian exports. Price spikes within Brazil in 2006–07 and again in 

2010 coincided with tight global inventories that triggered higher exports of Brazilian 

corn (figure 7.3). Increased exports disrupted a period of stable prices that benefited 

Brazilian livestock production growth between 2007 to 2010.66 If world prices increase 

rapidly in the future, Brazil is likely to increase exports in response, lowering corn 

availability and raising production costs in the Brazilian livestock sector. 

Although Brazilian producers are influenced by global market prices, because Brazilian 

corn has not been export-oriented historically, domestic prices are not fully integrated, as 

is the case with soybeans, into international markets such as the Chicago Board of Trade 

price. It is true that an increasing amount of corn is marketed through forward contracting 

(i.e., advance contracting, as opposed to a spot price), including 50–60 percent of the 

crop in 2011. However, there is little evidence that Brazilian corn producers use 

international exchanges to manage risk.67 Large international logistics companies play a 

prominent role in marketing, whether as buyers or third-party contractors. Nonetheless, 

corn is still primarily marketed domestically or even regionally, with corn producers 

typically selling to livestock operators that are nearby or that have the capabilities to 

purchase and receive corn transported from further away.68

One distinguishing feature of the Brazilian corn market is the lack of price integration 

within the country. High transportation costs and structural differences in regional supply 

and demand create dramatic differences in corn prices among areas. For example, corn

 62 For more discussion on the regional livestock production shifts, see chapters 8, 9, and 10; USDA, 

FAS, Brazil: Livestock and Products; Annual Livestock Report, 2006, August 25, 2006, 8; USDA, FAS, 

Brazil: Livestock and Products; Annual Livestock Report, 2006, September 1, 2008, 3; USDA, FAS, Brazil: 

Livestock and Products; Annual Livestock Report 2011, August 16, 2011, 5. 63 USDA, FAS, Brazil: Grain and Feed; Grain and Feed Update, July 2008, July 23, 2008, 2. 64 Brazilian Meat Monitor, “Government Aims to Avoid Further Hikes in Corn and Meat Prices,” 

May 6, 2011, 17; USDA, FAS, Brazil: Grain and Feed; Grain Annual, 2007, March 20, 2007, 6. 65 CEPEA, Indicador de Preços [Price indicator].

66 USDA, FAS, Brazil: Poultry and Products Annual, September 13, 2010, 2–4. 67 Brazilian Meat Monitor, “FEED News,” June 3, 2011, 2. 68 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 
7-14 

0

1

2

3

4

5

6

7

8

0

5

10

15

20

25

30

35

40

1/1/20064/1/20067/1/2006

10/1/2006

1/1/20074/1/20077/1/2007

10/1/2007

1/1/20084/1/20087/1/2008

10/1/2008

1/1/20094/1/20097/1/2009

10/1/2009

1/1/20104/1/20107/1/2010

10/1/2010

1/1/20114/1/20117/1/2011

10/1/2011

Monthly Average Price (R$) Year-to-Year Monthly Export Changes

prices in Mato Grosso can be as much as 25 percent lower than prices in Paraná and show 

very little correlation with each other.69 The fragmented market structure may facilitate 

exports, since domestic buyers may be less competitive than international buyers if 

marketing channels are inefficient. Regional shifts in livestock production and improved 

infrastructure may improve market integration over time, but the timeline is uncertain. 

Infrastructure 

As noted earlier, the cost of transporting corn to ports for export is much higher in Brazil 

than in the United States, eliminating much of the field cost advantages of producers in 

interior states. The cost of shipping corn from Mato Grosso to the port of Santos can be 

three to four times higher than that of corn transported from Iowa to New Orleans.70

Moreover, because of the capacity constraints of Brazil’s infrastructure system, it is 

difficult to export corn at certain times of the year. Because of their higher value, 

soybeans have priority access to freight over corn. Corn shipments to ports typically 

increase in the second half of the calendar year, after soybean shipments ease.71 As a 

result, most corn exports from Brazil are available only after soybean shipments have 

been concluded. 

Corn also competes with soybeans for storage capacity, and as with freight, it loses out 

when capacity is tight.72 Investors are preparing to build new storage for grains and 

oilseeds, primarily near ports, but access to low-interest capital will determine how soon 

new storage capacity is available, and it is uncertain how much of this storage will be 

 69 Brazilian Meat Monitor, January 3, 2011, to September 12, 2011. 70 Industry representative, interview by USITC staff, São Paulo, August 23, 2011. 71 USDA, FAS, Brazil: Grain and Feed Annual, March 16, 2011, 7. 72 Brazilian Meat Monitor, “Exchange Ratio Concerns Poultry and Pork Sectors,” February 11, 2011, 9. 

FIGURE 7.3 Export growth compared to monthly prices in Brazil, January 2006‒

October 2011 R$/60Kg 

Percent 

Source: GTIS, Global Trade Atlas database; CEPEA, BM&F Corn Prices.
7-15 

used for corn. 73 The lack of storage hurts farmers’ profitability, as they have fewer 

marketing options. Increased storage capacity would raise the value of Brazil’s corn and 

likely spur additional investment and production. 

Government Policies 

Most of Brazil’s government policies regarding corn stem from the minimum price 

supports that CONAB establishes for corn production. This value represents the amount 

that the federal government pays for product placed into public inventories. In 2010, 

minimum prices ranged from R$13.98 per 60 kg in Mato Grosso and Rondônia, to 

R$20.10 in most other states, including Paraná.74 In 2006, minimum prices ranged from 

R$11.00 to R$16.00 per 60 kg. Increases in the minimum price for corn occurred in 2009 

and then again in 2010. Participation in the programs fluctuated during 2006/07–2010/11, 

but from 2008/09 to 2010/11, when minimum prices were increased, the percentage of 

Brazil’s corn production benefiting from government payments rose from 2 percent to 

22 percent.75

The Premium for Marketing of Products (PEP), Equalization Premium Paid to the 

Producer (PEPRO), and Risk Premium for Acquisition of Agricultural Products Deriving 

from Private Contracts of Sales Options (PROP) programs are the three most significant 

programs for corn distribution. These programs are run by CONAB, and are tied to 

minimum price supports and government-controlled stocks. These programs are 

described in more detail in chapter 3. All three programs are designed to alleviate the 

high transportation costs of shipping grain within the country and to help distribute grain 

from corn-surplus to corn-deficit regions. 76 Some product is exported, although the 

programs themselves are considered transportation programs by the Brazilian 

government, rather than export subsidies.77

The PEP program is the most commonly used and has been an important component of 

both domestic and export marketing.78 The program increases margins on participating 

corn and makes it possible to market more corn, including for export. In 2010, CONAB 

spent R$760 million on PEP premiums for corn.79 While participation in these programs 

involved significant shares of corn production between 2006 and 2010, some speculate 

that the participation rate will fall in the future. Even in 2011, auctions have been unable 

to generate the same level of interest from purchasers, primarily due to the limited freight 

options offered.80 The programs have also been affected by administrative problems, such 

as failure to pay minimum prices to producers in a timely way.81 

 73 Industry representative, interview by USITC staff, Paraná, Brazil, August 2011. 74 CONAB, “Relatório de preço mínimo básico” [Report on basic minimum price] (accessed 

February 13, 2012). 75 USDA, FAS, Brazil: Grain and Feed Annual; Annual Report, March 16, 2011, 21. 76 Auctions can be targeted to specific regions and agents participating in the bidding process. Agents 

could include livestock operators, international traders, and other domestic users. 77 Government official, interview by USITC staff, Brasilia, August 24, 2011. 

78 USDA, FAS, Brazil: Grain and Feed Annual; Annual Report, March 16, 2011, 21. 79 CONAB, “Operações de PEP/2010” [PEP operations, 2010] (accessed November 9, 2011). 80 Brazilian Meat Monitor, “FEED News,” February 25, 2011, 14. 81 Industry representative, interview by USITC staff, São Paulo, Brazil, August 25, 2011. 
7-16 

Key Export Markets 

EU-27 

Market characteristics 

Corn consumption in the EU-27 has been relatively flat, averaging 62.0 million mt from 

2006/07 to 2010/11 (table 7.7). The EU-27 was the third largest consumer of corn in the 

world and fourth largest importer in 2010/11. Feed use declined slightly, while industrial 

use for bioenergy increased slightly.82 The livestock sector accounts for about 77 percent 

of corn consumption, although in the EU-27 wheat is more commonly used for feed than 

corn. The two grains compete in the feed market based on relative prices.83

TABLE 7.7 EU-27: Corn production, consumption, exports, and imports, MY 2006/07–2010/11 

2006/07 2007/08 2008/09 2009/10 2010/11 

Average

annual change

2006/07–2010/11

1,000 mt Percent

Production 53,829 47,555 62,321 56,947 55,795 1

Consumption 62,400 64,000 61,600 59,300 62,500 0

Exports 664 591 1,743 1,519 1,078 13

Imports 7,172 14,016 2,754 2,931 7,359 1

Trade balance –6,508 –13,425 –1,011 –1,412 –6,281 (

a

)

Source: USDA, FAS, PSD Online database (accessed January 23, 2012). 

a

Not applicable. 

Competition with the United States 

The EU-27’s corn production has also remained relatively stable, although more volatile 

than consumption. 84 Production averaged 55.3 million mt during 2006/07–2010/11, 

ranging from 47.6 million mt to 62.3 million mt.85 Weather-induced production shortages 

in recent years have spurred import spikes to satisfy demand, particularly in 2007/08.86

Gradually declining inventories, rising world prices, and neutral-to-deficit domestic 

production in recent years have increased EU-27 imports.87 Brazil is the largest foreign 

supplier of corn for the EU-27 for most of the period, accounting for 36 percent of total 

imports from 2006 to 2011 (table 7.8). 88 Other important suppliers are Argentina, 

Ukraine, and Serbia. The United States was the fifth-largest supplier, accounting for 

about 6 percent of total EU-27 imports from 2006 to 2011. 

 82 USDA, FAS, PSD Online (accessed October 24, 2011). 83 USDA, FAS, EU-27: Grain and Feed Annual, 2011, April 21, 2011, 5. 84 USDA, FAS, PSD Online (accessed October 24, 2011). 85 Ibid. 

86 USDA, FAS, EU-27: Grain and Feed; Annual, 2008, April 30, 2008, 14. 87 GTIS, Global Trade Atlas database (accessed October 5, 2011). 88 Ibid. 
7-17 

TABLE 7.8 EU-27: Corn imports, by supplier, 2006–11 

2006 2007 2008 2009 2010 2011 

Average annual 

change 2006–11 

Million $ Percent

Ukraine 45 19 370 122 118 761 76

United States 36 41 75 83 100 304 53

Brazil 142 1,767 1,193 60 373 295 16

Serbia 184 74 42 251 133 268 8

Argentina 182 626 1,134 108 114 167 ‒2

All other 116 173 250 243 204 470 32

 Total 705 2,700 3,063 865 1,043 2,265 26

Source: GTIS, Global Trade Atlas database (accessed April 18, 2012). 

EU-27 has stricter regulations and stronger consumer preferences regarding GM varieties 

of corn than most markets. 89 There is only one GM variety of corn approved for 

cultivation in the EU-27, and GM corn is grown in only six member countries, with Spain 

and Portugal accounting for over 90 percent of the planted acreage. 90 Brazil has a 

competitive advantage over the United States and Argentina in this market because of its 

ability to segregate and certify non-GM varieties in its export shipments.91 Although 

Brazil likely will continue producing increasing amounts of GM corn in the future, it will 

be better positioned than the United States and Argentina to meet the EU-27’s demand 

for non-GM corn products due to these existing logistical channels. 

Japan 

Market characteristics 

Japan is the world’s largest corn-importing country, relying on imports for over 

99 percent of its corn consumption (table 7.9).92 About 72 percent of Japanese corn 

consumption is for energy-intensive livestock rations.93 A declining population and lower 

per capita consumption of animal products have dampened demand for feed; total corn 

consumption fell 5 percent and corn use for feed fell nearly 8 percent from 2006/07 to 

2010/11.94

TABLE 7.9 Japan: Corn production, consumption, exports, and imports, MY 2006/07–2010/11 

2006/07 2007/08 2008/09 2009/10 2010/11 

Average

annual change

 2006/07–2010/11

1,000 mt Percent

Production 1 1 1 1 1 0

Consumption 16,500 16,600 16,700 16,300 15,600 –1

Exports 2 0 0 0 0 (

a

)

Imports 16,713 16,614 16,533 15,979 15,655 –1

Trade balance –16,711 –16,614 –16,533 –15,979 –15,655 (

a

)

Source: USDA, FAS, PSD Online database (accessed January 23, 2012). 

a

Not applicable. 

 89 USDA, FAS, EU-27: Agricultural Biotechnology Annual, July 29, 2011. 90 USDA, FAS, EU-27: Agricultural Biotechnology Annual, July 29, 2011, 6. 91 USDA, FAS, EU-27: Grain and Feed Annual, 2011, April 30, 2011, 8. 92 USDA, FAS, PSD Online (accessed January 23, 2012). 

93 USDA, FAS, Japan: Grain and Feed Annual, March 11, 2011, 13. 94 USDA, FAS, PSD Online (accessed January 23, 2012). 
7-18 

Competition with the United States 

Japan and the United States are long-standing trading partners with regard to corn 

(table 7.10). Between 2006 and 2011, nearly 94 percent of Japanese corn imports, with an 

average annual value of nearly $4 billion, came from the United States.95 While Japanese 

corn imports from Brazil are only a fraction of those from the United States, they have 

increased exponentially, from a mere $4,000 in value in 2006 to $299 million in 2011. In 

part this was because of the wheat export ban in Russia in 2010 that extended into 2011, 

which limited the supply of wheat for animal feed and increased demand for corn. Brazil 

is also able to serve the market for non-GM corn in Japan. 96 With a greater share of the 

U.S. crop going to ethanol production, Japan is likely to continue to expand its purchases 

from Brazil. However, the United States likely will remain the dominant supplier of 

Japanese corn imports in the foreseeable future. 

TABLE 7.10 Japan: Corn imports, by supplier, 2006–11 

2006 2007 2008 2009 2010 2011 

Average annual 

change 2006–11

Million $ Percent

United States 2,488 3,589 5,525 3,623 3,510 4,821 14

Brazil 0 9 1 10 149 299 (

a

)

Argentina 12 92 34 46 214 157 67

South Africa 0 0 0 0 4 44 (

a

)

EU-27 6 6 6 18 9 26 35

Ukraine 0 0 0 47 47 0 (

a

)

All other 78 147 32 13 17 13 –30

 Total 2,584 3,842 5,599 3,757 3,950 5,361 16

Source: GTIS, Global Trade Atlas database (accessed January 31, 2012). 

Note: Totals may not add due to rounding. 

a

Not applicable. 

Taiwan 

Market characteristics 

Despite the increase between 2006/07 and 2009/10, demand for corn imports in Taiwan 

in 2010/11 did not change significantly from 2006/07 levels, remaining at approximately 

4.2 million mt. Total consumption increased to 4.7 million mt in 2009/10 before falling 

due to higher world prices (table 7.11).97 However, Taiwan was still the sixth largest corn 

importer in 2010/11. Their poultry and hog sectors are the country’s primary users of 

imported corn, and 96 percent of corn consumption is used as livestock feed. 98

 

 95 GTIS, Global Trade Atlas database (accessed October 5, 2011). 96 USDA, FAS, Brazil: Grain and Feed; Grain Annual, March 20, 2007, 5. 97 USDA, FAS, PSD Online (accessed October 25, 2011). 98 USDA, FAS, Taiwan: Grain and Feed Annual, May 3, 2011, 7. 
7-19 

TABLE 7.11 Taiwan: Corn production, consumption, exports, and imports, MY 2006/07–2010/11 

2006/07 2007/08 2008/09 2009/10 2010/11 

Average 

annual change

2006/07–2010/11

1,000 mt Percent

Production 37 37 32 27 38 1

Consumption 4,425 4,500 4,650 4,700 4,325 0

Exports 0 0 0 0 0 (

a

)

Imports 4,283 4,527 4,532 4,521 4,200 0

Trade balance –4,283 –4,527 –4,532 –4,521 –4,200 (

a

)

Source: USDA, FAS, PSD Online database (accessed January 23, 2012). 

Note: Totals may not add due to rounding. 

a

Not applicable. 

Taiwan relies on imports for over 99 percent of its domestic supply. Between 2006 and 

2011, annual average Taiwanese imports of corn were over $1 billion (table 7.12).99

While the United States provided the majority of Taiwan’s corn imports, U.S. market 

share slipped from 99 percent ($756 million) in 2006 to 64 percent ($884 million) in 

2011. Brazil began exporting to Taiwan in 2009 and immediately became Taiwan’s 

second-largest supplier in both 2009 ($123 million), 2010 ($314 million), and 2011 

($335 million). 

TABLE 7.12 Taiwan: Corn imports, by supplier, 2006–11

2006 2007 2008 2009 2010 2011 

Average annual 

change 2006–11

Million $ Percent

United States 756 925 1,024 789 797 884 3

Brazil 0 0 0 123 314 335 (

a

)

Argentina 0 13 0 0 117 52 (

a

)

South Africa 0 0 0 0 0 70 (

a

)

India 0 6 199 36 8 8 (

a

)

All other 1 1 63 6 1 1 55

 Total 758 945 1,287 954 1,237 1,385 13

Source: GTIS, Global Trade Atlas database (accessed April 18, 2012). 

Note: Totals may not add due to rounding. 

a

Not applicable. 

Competition with the United States 

Decreased price competitiveness and an effort to diversify suppliers as the United States 

exports a smaller proportion of its crop are the primary reasons the United States has lost 

its role supplying 99 percent of corn for Taiwan (table 7.12).100 However, the United 

States maintains a reputation as a reliable supplier of high-quality corn, which Brazil has 

yet to establish. Nonetheless, Brazil is likely to continue to be a competitive supplier if 

 99 GTIS, Global Trade Atlas database (accessed October 5, 2011). 100 USDA, FAS, Taiwan: Grain and Feed Annual, May 3, 2011, 7. 
7-20 

world prices of corn remain high and Taiwanese importers seek less expensive 

alternatives to U.S. corn.101

Colombia 

Market characteristics 

Colombia’s consumption of corn rose by 11 percent between 2006/07 and 2010/11, from 

4.7 million mt to 5.2 million mt (table 7.13).102 This is primarily because of increased 

investment in the domestic poultry industry that led to more feed-intensive production 

systems.103 Annual corn demand for food and industrial use in Colombia has remained 

stable at approximately 1.2 million mt. Colombia was the seventh largest corn importer in 

2010/11. 

TABLE 7.13 Colombia: Corn production, consumption, exports, and imports, MY 2006/07–2010/11 

2006/07 2007/08 2008/09 2009/10 2010/11 

Average

annual change

2006/07–2010/11

1,000 mt Percent

Production 1,531 1,655 1,635 1,610 1,450 ‒1

Consumption 4,700 5,100 4,900 5,100 5,200 2

Exports 3 2 1 1 0 (

a

)

Imports 3,386 3,267 3,068 3,651 3,504 1

Trade balance –3,383 –3,265 –3,067 –3,650 –3,504 (

a

)

Source: USDA, FAS, PSD Online database (accessed January 23, 2012). 

Note: Totals may not add due to rounding. 

a

Not applicable. 

Colombia is a corn-deficit country, requiring imports to satisfy its growing demand. 

Domestic production accounted for only 28 percent of its total consumption in 2010.104

On average, between 2006 and 2010 Colombia imported $743 million of corn 

(table 7.14). Up to 2008, the United States held a large majority of that market share, 

peaking at 94 percent in 2007. From 2009 to 2011, however, Argentina and Brazil 

provided most of Colombia’s imported corn. Imports from Brazil reached $122 million in 

2011, compared with just $5 million in 2006. 

Competition with the United States 

Colombia protects its corn producers through a tariff-rate quota (TRQ) and the Andean 

Community’s price band system, which applies a variable duty on imports relative to 

world prices. 105 Colombia began implementing trade preferences on goods from 

Mercosul countries in 2009. This made Argentine and Brazilian corn more 

price-competitive than U.S. corn and has taken substantial market share away from the 

 101 USDA, FAS, Taiwan: Grain and Feed Annual, May 3, 2011, 8. 102 USDA, FAS, PSD Online (accessed October 25, 2011). 103 USDA, FAS, Colombia: Grain and Feed Annual, March, 2010, 3. 104 USDA, FAS, PSD Online (accessed October 25, 2011). 105 USDA, FAS, Colombia: Grain and Feed Annual, March 15, 2011, 6–7. 
7-21 

TABLE 7.14 Colombia: Corn imports, by supplier, 2006–11 

2006 2007 2008 2009 2010 2011 

Average annual 

change 2006–11

Million $ Percent

Argentina 36 26 106 191 482 596 75

United States 396 626 746 250 147 184 ‒14

Brazil 5 2 72 179 155 122 89

Paraguay 4 4 2 14 2 14 ‒29

Mexico 4 1 0 30 17 4 0

All other 8 7 9 8 3 7 ‒18

 Total 453 666 935 671 806 927 15

Source: GTIS, Global Trade Atlas database (accessed April 18, 2012). 

Note: Totals may not add due to rounding. 

United States.106 In 2010, Colombia imposed a duty of at least 15 percent ad valorem on 

the import of U.S. corn, while the imposed duty on imports from Mercosul countries was 

reduced by 8.1 percent. However, the projected entry into force of the U.S.-Colombia 

Free Trade Agreement in 2012 is expected to improve the competitiveness of U.S. corn 

by expanding duty-free access through an increase in the TRQ and a phaseout of out-ofquota duties over the next 12 years.107

Wheat 

Industry Overview 

There are two major economic and geographic forces shaping Brazil’s wheat industry. 

First, Brazil’s wheat production is smaller than that of corn or soybeans, and does not 

have the same potential for expansion. This is primarily because Brazil’s warm, wet 

climate is less favorable to wheat than to corn and soybeans. Because of the climate, 

Brazil grows only soft winter wheat, with production limited to the South and 

Southeastern regions of the country. Although improved wheat yields over the past 

several decades have raised domestic production, production has been unable to meet the 

country’s domestic demand. As a result, Brazil imports over half of the wheat it 

consumes, mostly higher-quality milling wheat from Argentina or North America. 

Second, although Brazil exports substantial amounts of wheat, most of the export 

volumes are consumed as animal feed because its low quality makes it unsuitable for 

milling.108 As a result, Brazilian wheat exports compete more with corn and other feed 

grains than they do with wheat for human consumption. Overall, Brazilian wheat exports 

are uncompetitive with U.S. wheat both in quality and in the quantities shipped to 

third-country markets. 

 106 USDA, FAS, Colombia: Grain and Feed Annual, March 15, 2011, 5. 107 The White House, “U.S.-Colombia Trade Promotion Agreement,” April 6, 2011. 108 USDA, FAS, Brazil: Grain and Feed Update; Wheat Update, April 30, 2010, 9. 
7-22 

0

0.5

1

1.5

2

2.5

3

0

1

2

3

4

5

6

7

Mt/hectare

Million mt

Production Yield

Source: USDA, FAS, PSD Online (accessed Janaury 23, 2012).

FIGURE 7.4 Brazilian wheat production and yields, MY 2000/2001–2010/11

Brazilian Production, Consumption, and Trade 

Production 

Wheat production trends in Brazil have been relatively flat over the past five to seven 

years, with the exception of one weather-related downturn in 2006/07 (table 7.15 and 

figure 7.4).109 Owing to drought and an early freeze, production in 2006/07 plunged, 

falling by 54 percent from the previous year’s level due to lower yields and harvested 

acreage.110 After production recovered in 2008/09, levels remained between 5 million mt 

and 6 million mt. In the past, the Brazilian government established goals for increases in 

domestic wheat production, but these were not met because of various economic, 

government policy, and agronomic constraints.111

TABLE 7.15 Brazil: Wheat production, consumption, exports, and imports, MY 2006/07–2010/11 

2006/07 2007/08 2008/09 2009/10 2010/11 

Average

annual change

2006/07–2010/11

1,000 mt Percent

Production 2,234 3,825 5,880 5,026 5,900 28

Consumption 10,300 10,300 10,700 11,000 10,800 1

Exports 40 767 369 1,195 2,539 182

Imports 7,743 7,076 6,762 6,667 6,710 –4

Trade balance –7,993 –6,002 –6,003 –5,964 –4,200 (

a

)

Source: USDA, FAS, PSD Online database (accessed November 2, 2011). 

a

Not applicable. 

 109 USDA, FAS, PSD Online (accessed May 12, 2011). 110 USDA, FAS, Brazil: Grain and Feed; Grain Annual, March 20, 2007, 2. 111 USDA, FAS, Brazil: Grain and Feed; Grain and Update, July 23, 2008, 9. 
7-23 

Wheat yields in Brazil are within the range of other exporting countries. Between 2006 

and 2010, average yields in Brazil were 2.13 mt/ha, much lower than yields in the EU-27 

(5.24), China (4.69), United States (2.89), Argentina (2.81), and India (2.78), but better 

than those in Russia (2.00) and Australia (1.44).112 Wheat production trends in Brazil are 

driven more by yield than by area harvested, and aside from the recovery in acreage after 

the poor 2006/07 crop, wheat area has remained fairly stable.113 Expansion in area is 

constrained both by climate and by competition for land from more profitable crops, such 

as corn and soybeans.114

Domestic wheat is predominantly milled into flour for human consumption in Brazil, and 

on average between 2006–11, 98 percent of wheat consumption was for food or seed 

use.115 Although each state has at least one flour mill, the milling sector in Brazil is 

concentrated in the South and Southeast states.116 Paraná, São Paulo, and Rio Grande do 

Sul are the three largest milling states, respectively. Flour production fluctuated from 

2006/07 to 2010/11, but increased overall.117

As noted, Brazil produces predominantly soft classes of wheat.118 Flour milled from these 

types of wheat lacks the characteristics preferred for bread making. As a result, Brazil 

imports higher-quality wheat, which is blended with domestic wheat by millers to 

produce bread-quality flour (table 7.16). Brazil is one of the world’s largest wheatimporting countries, importing more than half of its total supply.119 Historically, nearly 

all of Brazil’s wheat imports came from Argentina, owing to its proximity and its 

eligibility for lower tariffs as a Mercosul member.120 However, Argentine export policies 

and low production years in both Argentina and Brazil required Brazilian millers to 

source high-quality wheat from other countries, including the United States and 

Canada.121 Wheat imports from non-Mercosul members face a 10 percent tariff, as well 

as the merchant marine tax that is 25 percent of the cost of freight, which increases the 

delivered price significantly.122

Wheat exports from Brazil fluctuated each year from 2006 to 2011 (table 7.17). Brazilian 

wheat is vulnerable to wet weather immediately before harvest, which often diminishes 

 112 USDA, FAS, PSD Online (accessed January 23, 2012). 113 Ibid. 114 USDA, FAS, Brazil: Grain and Feed Annual; Annual Report, March 16, 2011, 9. 115 In Brazil, corn is the primary grain for animal feed; domestic animal producers are not likely to use 

wheat as a feedstuff, primarily because wheat supplies are erratic due to inconsistent production volumes and 

qualities. Corn production is typically located closer to livestock herds, and the supply is more reliable. 

Moreover, using wheat would require a reformulation of livestock rations. Instead, wheat of this quality is 

largely exported to foreign markets, utilizing the Brazilian government’s PEP program. In 2011/12, 

approximately 10 percent of Brazil’s wheat production was used for animal feed in the domestic market, a 

five-year high. USDA, FAS, Brazil: Grain and Feed; Grain Annual, 2012/2013 Forecast, March 15, 2012, 2. 116 ABITRIGO, “Moagem de trigo, 2010 por estado/regiõ” [Wheat milling, 2010, by state/region], n.d. 

(accessed January 24, 2012). 117 ABITRIGO, “Evolução do mercado de trigo” [Wheat market trends], n.d. (accessed January 24, 

2012). 118 Industry representative, interview by USITC staff, Washington, DC, June 7, 2011. 119 USDA, FAS, PSD Online (accessed July 25, 2011). 120 USDA, FAS, Brazil Grain and Feed: Opportunities for U.S. Wheat, February 10, 2009. 121 USDA, FAS, Brazil: Grain and Feed; Grain Annual, 2008, March 19, 2008, 10. 122 USDA, FAS, Brazil: Grain and Feed; Brazil Temporarily Lowers Wheat Import Tariff, February 8, 

2008, 2. 
7-24 

TABLE 7.16 Brazil: Wheat imports, by supplier, 2006–11

2006 2007 2008 2009 2010 2011 

Average annual 

change 2006–11

 Million $ Percent

Argentina 910 1,167 1,264 707 893 1,481 10

Uruguay 21 29 32 210 292 212 59

Paraguay 45 38 152 168 132 95 16

United States 3 86 318 46 118 30 59

Canada 10 72 107 71 86 15 8

All other 0 (a

) (a) 6 8 17 (b)

 Total 989 1,392 1,874 1,209 1,528 1,832 13

Source: GTIS, Global Trade Atlas database (accessed January 31, 2012). 

Note: Totals may not add due to rounding. 

a

Less than $500,000. bNot applicable.

TABLE 7.17 Brazil: Wheat exports to selected markets, 2006–11 (million $) 

 2006 2007 2008 2009 2010 2011

Algeria 0 12 20 4 0 207

Egypt 5 0 0 5 16 55

Tunisia 0 0 8 0 7 54

South Africa 2 0 0 8 23 29

Morocco 0 7 33 0 0 26

EU-27 17 (a) (a) (a) (a) (a)

United States (a

) (a) (a) 17 42 0

Vietnam 8 0 23 0 37 0

Philippines 26 0 0 0 35 0

Pakistan 0 0 81 11 0 0

All other 6 11 40 19 66 328

 Total 64 30 204 63 227 699

Source: GTIS, Global Trade Atlas database (accessed January 31, 2012). 

Note: Totals may not add due to rounding. 

a

Less than $500,000. 

its quality to feed-grade wheat.123 As noted earlier, most of the wheat Brazil sells in 

international markets is of feed quality, competing more with corn and other feed grains 

than with milling-quality wheat.124 These exports often depend on government programs, 

such as PEP, to be competitive.125 Wheat is primarily exported shortly after the harvest 

season, generally beginning in November or December, peaking during February and 

March, and concluding by May.126 The majority of wheat exports are shipped before the 

soybean export season begins in February to avoid competing with soybeans for freight 

and storage capacity. 

 

 123 USDA, FAS, Brazil: Grain and Feed Update; Wheat Update, April 30, 2010, 2. 124 Industry representative, interview by USITC staff, Washington, DC, June 7, 2011. 125 USDA, FAS, Brazil: Grain and Feed Annual; Annual Report, March 16, 2011, 12. 126 GTIS, Global Trade Atlas database (accessed October 13, 2011). 
7-25 

Regional Summary and Industry Structure 

Wheat production is focused in the Southern region of the country (table 7.18), with over 

90 percent of the production from three Brazilian states—Paraná (53 percent on average 

from 2006 to 2010), Rio Grande do Sul (37 percent), and Santa Catarina (5 percent).127

Wheat is grown during Brazil’s winter season. In Paraná and Santa Catarina, planting 

takes place between April and May, while harvest occurs between September and 

November.128

TABLE 7.18 Brazil: Wheat production by state, 2006–10 (mt) 

State 2006 2007 2008 2009 2010

Paraná 1,236,294 1,927,216 3,068,116 2,482,776 3,442,660

Rio Grande do Sul 823,062 1,723,007 2,198,902 1,912,138 1,974,800

Santa Catarina 146,146 203,334 323,617 275,193 241,093

São Paulo 102,690 105,159 169,888 111,224 131,891

Minas Gerais 58,335 51,253 97,129 100,979 84,902

All other 118,321 104,088 169,479 173,215 161,444

 Total 2,484,848 4,114,057 6,027,131 5,055,525 6,036,790

Source: IBGE, Municipal Agricultural Production and SIDRA databases (accessed July 15, 2011). 

Total crop area in the South has remained stable, so increased wheat production in the 

region has relied on higher yields. Wheat varieties that perform well in the cerrado have 

been developed, primarily from investments and research by the Empresa Brasileira de 

Pesquisa Agropecuária (Embrapa).129 Historically, small amounts of wheat were grown in 

the Center-West states of Mato Grosso and Bahia, but production has stopped in recent 

years owing to better returns from soybeans, sugar, cotton, and corn.130

The structure of wheat production in the Southern states of Brazil does not differ much 

from that of corn. Farms are typically smaller than in the Center-West, but similar to 

those in the Midwestern United States. 131 Like other commodity producers, wheat 

farmers in this part of the country benefit from cooperatives that provide competitive 

scale and efficiencies.132

Primary Factors Affecting Competitiveness 

Cost of Production 

The overall costs of producing wheat in Brazil and the United States are similar, although 

a comparison of data for the state of Paraná in Brazil and the Heartland region of the 

 127 USDA, FAS, Brazil: Grain and Feed; Grain Update, July 2008, July 23, 2008, 3. 128 In Rio Grande do Sul, plantings take place in May or June, while harvest begins in October and can 

last through December. USDA, OCE, Joint Agricultural Weather Facility, “Major World Crop Areas,” n.d. 

(accessed January 24, 2012). 129 Government official, interview by USITC staff, August 25, 2011. 130 IBGE, Municipal Agricultural Production and SIDRA databases. 131 IBGE, Census of Agriculture 2006, n.d. 132 Industry representative, interview by USITC staff, Paraná, Brazil, August 29, 2011. 
7-26 

United States shows significant differences in cost structures (table 7.19).133 Comparisons 

between Brazilian and U.S. wheat production costs should also factor in quality and class 

differences, since Brazilian wheat is likely to receive lower returns than U.S. wheat.134

TABLE 7.19 Wheat: Average 2010/11 costs of production at various R$/$ exchange rates (¢/kg)

United States 

Heartland Brazil: Paraná 

Products 

(actual) (actual) 

R$/US$= 1.76

(hypothetical) 

R$/US$= 1.5 

(hypothetical) 

R$/US$= 2.0

Seed 1.69 2.14 2.51 1.89

Fertilizer 5.77 3.32 3.89 2.92

Chemical inputs 0.40 1.70 2.00 1.50

Labor 1.41 0.57 0.67 0.51

Other operational 2.65 2.60 3.05 2.29

 Total, variable costs 11.93 10.34 12.13 9.10

Land 7.48 3.66 4.29 3.22

Physical capital 4.32 6.38 7.48 5.61

Other fixed costs 0.56 1.59 1.86 1.40

 Total fixed costs 12.35 11.62 13.63 10.23

 Total, costs 24.29 21.96 25.77 19.33

Farm-to-port freighta

 2.99 3.45 3.45 3.45

 Total cost to port 27.28 25.41 29.22 22.78

Source: CONAB, “Custo de Producão” [Production costs], 2011; USDA, ERS, “Commodity Costs and Returns 

Data,” 2010; USDA, AMS, Brazil Soybean Transportation, December 6, 2010; USDA, AMS, Grain Transportation 

Indicators, December 30, 2010. 

 aBased on Brazil 4th-quarter 2010 freight rates; USDA, AMS, “Brazil Soybean Transportation Report,” 2010. For 

the United States, based on December 6, 2010, price from USDA, AMS, Grain Transportation Indicators. Unit car 

rate from Champaign-Urbana, IL, to New Orleans, LA.

Brazil benefits from generally lower field costs of production than in the United States. 

Brazil’s cost advantage is especially marked when it comes to land and labor costs. 

Fertilizer costs are also less in Brazil, likely reflecting lower application levels rather than 

lower unit costs. However, capital equipment and financing costs are much higher in 

Brazil than in the United States. Additionally, over the past five years the Brazilian real

has strengthened against the dollar (see chapter 4); as the real appreciates, Brazilian 

wheat production cost becomes less competitive against U.S. wheat. As table 7.19 

illustrates, in 2011, the exchange rate was approximately R$1.76 per dollar, which still 

delivers a cost advantage to Brazil of 1.87¢/kg. But at a rate of R$1.50 per dollar, Brazil 

would face a cost disadvantage of 1.9¢/kg. 

Government Policies 

Like corn, wheat is eligible for many of CONAB’s programs. CONAB sets a minimum 

price level at which it can purchase production when local prices fall below the set 

 133 The “Heartland” is a region defined by USDA, ERS, “Commodity Costs and Returns Data.” It 

includes Illinois, Indiana, and Iowa, as well as parts of Ohio, Missouri, Kentucky, South Dakota, and 

Minnesota. This region, particularly the southern portion, produces a fair amount of soft-class wheat, similar 

to Brazil. 134 Industry representative, interview by USITC staff, São Paulo, Brazil, August 22, 2011. 
7-27 

amount. Although price levels are set by each Brazilian state, there have been two 

effective price levels for wheat throughout the country: one for the major producing 

Southern states and one for the rest of the country. Between 2006 and 2010, minimum 

price levels increased from R$331 per mt to R$370 per mt in the Southern region, and 

from R$372 per mt to R$411 per mt elsewhere.135 As it did for corn, the increase in the 

minimum price reflects higher world prices and production costs. CONAB also increased 

the amount of production eligible for participation in government marketing programs, 

such as PEP. 

Minimum price policies are an important factor influencing farmers’ decisions whether to 

plant corn or wheat.136 Participation by wheat growers in the PEP fluctuates from year to 

year. In 2007, the government reported no participation by the wheat industry, while in 

2008 participation reached 1.4 million mt, equivalent to nearly 35 percent of total 

production.137 In 2010, only 11 percent of wheat production was marketed through PEP. 

The government states that the program’s benefits to wheat, like those to corn, are a 

transportation subsidy as opposed to an export subsidy; however, the PEP benefits 

internationally marketed wheat, particularly lower-quality wheat that is marketed as 

animal feed.138

Key Export Markets 

Between 2006 and 2010, Brazil wheat exports were highly volatile, with spikes in 2008 

and 2010 caused by unique market conditions (table 7.17). Brazil’s export volumes are 

only a small fraction of those reached by large-scale exporters, such as the United States, 

Russia, Ukraine, Australia, and the EU-27.139 Nonetheless, in 2008 and 2010, Brazil’s 

export values increased dramatically, partly owing to tight global supplies that raised 

international prices and partly to poor harvest conditions in Brazil that led to an 

oversupply of lower-quality wheat unsuited for domestic milling.140 Brazil’s wheat does 

not directly compete with U.S. wheat due to quality; it is more likely to compete with 

corn or other feed grains in third-country markets. 

In 2008/09, world wheat inventories fell to a 30-year low, spurring record high prices.141

Higher prices and a larger volume of exports resulted in wheat export values of 

$204 million for Brazil in 2008, a nearly 600 percent increase from the previous year. 

Brazil’s top 4 markets (out of 19 total) were Pakistan ($81 million), Morocco 

($33 million), Vietnam ($23 million), and Algeria ($20 million). 142 By comparison, 

Brazil exported to 14 countries in 2007, with sales to the largest market, Algeria, coming 

to only $12 million. Brazil’s prices for exported wheat that year were lower than those of 

 135 CONAB, “Relatório de preço mínimo básico” [Report on basic mínimum price] (accessed 

October 4, 2011). 136 Industry representative, interview by USITC staff, São Paulo, Brazil, August 22, 2011. 137 USDA, FAS, Brazil: Grain and Feed Annual; Annual Report, March 19, 2011, 22. 138 USDA, FAS, Brazil: Grain and Feed Update; Wheat Update, April 30, 2010, 2. 139 GTIS, Global Trade Atlas database (accessed November 1, 2011). 140 USDA, ERS, Wheat Outlook, October 12, 2010; USDA, ERS, Wheat Year in Review 

(International), May 2008. 141 USDA, ERS, Wheat Year in Review (International), May 2008. 142 GTIS, Global Trade Atlas database (accessed September 30, 2011). 
7-28 

the United States, EU-27, Canada, and Australia, making Brazil an attractive supplier for 

more price-sensitive developing country buyers.143

In 2009, Brazil’s wheat exports fell to $63 million, but surged again in 2010/11 to 

$227 million, primarily because of wet harvest conditions that diminished the crop’s 

quality for milling. 144 The United States ($42 million), Vietnam ($37 million), 

Philippines ($35 million), and South Africa ($23 million) were Brazil’s largest markets 

for wheat that year. As in 2008/09, production shortfalls led to tight global supplies in 

2010/11.145 Severe drought in Eastern Europe led to harvest shortfalls in several of the 

world’s leading wheat-exporting countries, including Russia and Ukraine. 146 This 

benefited the 2010/11 Brazilian wheat crop, which was available for exports at the end of 

2010 and continued into 2011.147

As noted, Brazil typically exports wheat when global supplies are tight and prices are 

high or when domestic harvest conditions result in an oversupply of feed-quality wheat. 

Nevertheless, Brazil remains a net importer of wheat—globally as well as from the 

United States—and is likely to remain one of the biggest importers in the world.148

Geographic production constraints, better returns from competing crops, and quality 

limitations are likely to keep Brazil as only a minor supplier in the global market. 

 

 143 GTIS, Global Trade Atlas database (accessed November 1, 2011). 144 USDA, FAS, Brazil: Grain and Feed Update; Wheat Update, April 30, 2010, 2. 145 USDA, ERS, Wheat Outlook, October 12, 2010, 3. 146 USDA, ERS, Wheat Outlook, September 14, 2010, 4. 147 GTIS, Global Trade Atlas database (accessed November 1, 2011). 148 Ibid. 
7-29 

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n.d. http://www.abitrigo.com.br/pdf/MOAGEM_TRIGO_UF_REG_2010.pdf. (accessed 

October 12, 2011). 

———. “Evolvçûo do Mercado de trigo,” n.d. http://www.abitrigo.com.br/ (accessed October 12, 2011.

Associação Nacional Exportadores de Cereaís (ANEC). “Evolução das exportações por estado—2011,” 

 n.d. http://www.anec.com.br/links.html (accessed November 14, 2011).

Brazilian Meat Monitor. “Exchange Ratio Concerns Poultry and Pork Sectors,” February 11, 2011. 

———. “Brazilian Farmers to Import Corn from Argentina,” April 1, 2011. 

———. “FEED News,” January 21, 2011. 

———. “FEED News,” February 18, 2011. 

———. “FEED News,” February 25, 2011. 

———. “FEED News,” March 18, 2011. 

———. “FEED News,” March 25, 2011. 

———. “FEED News,” April 8, 2011. 

———. “FEED News,” May 27, 2011. 

———. “FEED News,” June 3, 2011. 

———. “FEED News,” June 10, 2011. 

———. “FEED News,” June 23, 2011. 

———. “Government Aims to Avoid Further Hikes in Corn and Meat Prices,” May 6, 2011. 

———. “High Production Costs Could Undermine Feedlots,” June 3, 2011. 

———. “Sao Paulo: Government Will Subsidize Option Contracts,” February 18, 2011. 

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 ESALQ/BM&F Bovespa” (accessed September 28, 2011). http://www.cepea.esalq.usp.br/milho/. 

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http://www.conab.gov.br/conteudos.php?a=1280&t=2 (accessed January 25, 2012). 

———. Custo de Produçào: Culturas de Seca, http://www.conab.gov.br/conteudos.php?a=1278&t=2

(accessed July 25, 2011). 
7-30 

———. Custo de Produção: Culturas Verão. 

http://www.conab.gov.br/conteudos.php?a=1276&t=2&Pagina_objcmsconteudos=3#A_objcmsco

nteudos

http://www.conab.gov.br/conteudos.php?a=1276&t=2&Pagina_objcmsconteudos=4#A_objcmsco

nteudos (accessed July 25, 2011). 

———. “Operacões de PEP/2010,” n.d. http://www.conab.gov.br/conteudos.php?a=1142&t=2 (accessed 

November 9, 2011).

 

———. “Preço Mínimo Básico,” n.d. http://www.conab.gov.br/detalhe.php?a=542&t=2. (accessed 

October 4, 2011).

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Brazil.” In The Brazil Competitiveness Report. World Economic Forum, 2009. 

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(accessed October 4, 2011). 

———. Municipal Agricultural Production and SIDRA Database (accessed July 14, 2011). 

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t. 

———. “Grain Transportation Indicators.” Grain Transportation Report, December 30, 2010.

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t. 
7-31 

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Returns Data,” 2010. 

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———. Wheat Year in Review (International): Low 2007/2008 Stocks and Higher Prices Drive Outlook.

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———. Brazil: Grain and Feed; Opportunities for U.S. Wheat in Brazil, by Julie Morin. GAIN Report 

no. BR9601, February 10, 2009. 

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no. BR0803, March 15, 2012. 

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no. BR0628, December 10, 2010. 

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no. BR9627, September 22, 2009. 

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2011. 
7-32 

———. Brazil: Livestock and Products; Annual Livestock Report, 2006, by Joao Silva. GAIN Report no. 

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0714, September 2, 2011. 

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———. EU-27: Grain and Feed Annual, 2011, by Steve Knight. April 21, 2011. 

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———. World Agricultural Outlook Board. USDA Agricultural Projections to 2020. OCE-2011-1, 

February 2011. http://www.usda.gov/oce/commodity/ag_baseline.htm. 
7-33 

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Agriculture, Economic Research Service, October 12, 2010.

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8-1 

CHAPTER 8 

Poultry 

Overview 

Poultry is an important and growing industry in the Brazilian agricultural sector. In 2011, 

Brazil was the world’s third leading producer of broiler meat, behind the United States 

and China, and the largest exporter (table 8.1).1

 Brazil’s broiler industry is highly exportoriented, with one-quarter of its production exported in 2011, compared with 18 percent 

in the United States. However, the share of Brazilian production exported has fallen in 

recent years because of both growing domestic consumption and a weak global economy 

that has reduced poultry demand globally.2

 

Export competitiveness in the poultry industry is affected by several factors, including 

cost of production, product differentiation, market access, transportation, and exchange 

rates. Because the cost structure of Brazilian and U.S. live-bird production is similar 

(largely because feed costs are closely linked to global corn and soybean prices), other 

factors have a greater influence on differences in export competitiveness between Brazil 

and the United States. 

Brazil’s export competitiveness in third-country markets is enhanced by its success in 

differentiating its poultry products based on the preferences of its customers, such as 

halal production to serve Middle Eastern markets. This allows Brazil to maintain a strong 

market share in countries which have very specific product requirements, such as Japan 

and Saudi Arabia. Brazil’s product differentiation also limits direct competition between 

Brazil and the United States in most third-country markets because the United States 

primarily exports standard dark meat cuts. 

Increases in Brazilian labor rates, high transportation costs, and the appreciation of the 

real all threaten the competitiveness of Brazilian poultry in third-country markets. In the 

future, rising labor costs could reduce the ability of Brazilian producers to make 

specialized products cost-effectively. As explained in detail below, specialized products 

and packaging normally require more labor to produce than standard cuts. While 

customers who are less price-sensitive are more likely to continue to pay a premium for a 

specialized product, even as prices rise, at some point escalating costs are likely to lower 

the overall export volumes of Brazil’s broiler meat. 

 1

 A broiler is a chicken raised for its meat. Broiler meat is the most commonly produced, consumed, 

and traded poultry in the world. Other types of poultry include turkey, goose, and duck. This chapter covers 

only broiler meat, which is also referred to as chicken. Broiler meat comes in many forms, including whole 

birds and cuts such as breasts, legs, and wings. 2

 USDA, FAS, PSD Online (accessed February 6, 2012). 
8-2 

TABLE 8.1 Broiler meat: Production, consumption, and trade, selected producers and markets, 2011 (1,000 mt) 

Production Consumption Imports Exports Trade balance

Producers 

 United States 16,757 13,890 47 2,966 2,919

 China 13,200 13,020 230 410 180

 Brazil 12,954 9,655 1 3,300 3,299

 EU-27 9,500 9,100 700 1,100 400

 Mexico 2,922 3,492 590 20 -570

 All other 25,700 30,744 6,431 1,357 -5,074

 Total 81,033 79,901 7,999 9,153 (b

)

Selected Major Importers 

 Russia 2,520 2,907 390 3 -387

 Japan 1,235 2,060 840 5 -835

 Thailand 1,350 870 0 460 460

 Saudi Arabia 590 1,410 830 10 -820

 Hong Kong 12 262 250 (a

) (a)

 Subtotal 5,707 7,509 2,310 478 (b

)

Source: USDA, FAS, PSD Online (accessed February 6, 2012). 

 

 aNot available. 

b

Not applicable. 

 

Brazilian Production, Consumption, and Trade 

Between 2006 and 2011, Brazil was the world’s third-largest producer of broiler meat 

(measured in metric tons (mt)), accounting for 15 percent of global production.3

 The 

United States and China respectively accounted for 22 percent and 16 percent of global 

production during this period.4

 Brazilian production grew 38 percent between 2006 and 

2011, exceeding the growth of both China (28 percent) and the United States (5 percent) 

(table 8.2).5

 If the rates of growth in Brazil and China continue along this path, Brazil 

may soon become the world’s second-largest producer of broiler meat. 

TABLE 8.2 Brazil: Broiler meat production, consumption, exports, and imports, 2006–11

 2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

 1,000 mt Percent

Production 9,355 10,305 11,033 11,023 12,312 12,954 7

Consumption 6,853 7,384 7,792 8,032 9,132 9,655 7

Exports 2,502 2,922 3,242 2,992 3,181 3,300 6

Imports 0 1 1 1 1 1 (a

)

Trade balance 2,502 2,921 3,241 2,991 3,180 3,299 6

Source: USDA, FAS, PSD Online (accessed February 6, 2012). 

 aNot applicable. 

 3

 USDA, FAS, PSD Online (accessed February 6, 2012). 

4

 USDA, FAS, PSD Online (accessed February 6, 2012). While Brazil and China’s share of global 

production was relatively stable through the period, the U.S. share fell from 25 percent in 2006 to 21 percent 

in 2010. 5

 USDA, FAS, PSD Online (accessed February 6, 2012). 
8-3 

Brazil accounted for 11 percent of global poultry consumption by volume between 2006 

and 2011. During this period, Brazilian consumption grew 41 percent; by 2010, Brazil 

had surpassed the European Union (EU-27) to become the world’s third-largest consumer 

of broiler meat, behind the United States and China.6

 On a per capita basis, Brazilian 

poultry consumption grew from 36.5 kilograms (kg) in 2006 to 44.0 kg in 2010, a 

21 percent increase.7 Brazil’s sharp rise in poultry consumption is associated primarily 

with rising incomes and a trend toward the consumption of a wider variety of foods, 

especially meat. 8 Poultry consumption also benefits from its relatively low price 

compared with beef and pork.9

 In general, Brazilian consumers prefer large whole birds, 

although there is growing demand, especially among the middle and upper- classes, for 

processed products, such as precooked meals and chicken nuggets.10 Because Brazil is 

self-sufficient in broiler meat production, its annual imports are negligible. 

Over one-quarter of Brazilian poultry production was exported during 2006–11. For most 

of this period, Brazil was the world’s largest broiler meat exporter by volume, accounting 

for about 37 percent of global exports.11 During this period, growth in Brazilian broiler 

exports was driven by growing chicken demand globally (table 8.3).12 Brazilian exports 

are highly concentrated in the Middle East and Asia.13 The share of Brazilian poultry 

exports going to the Middle East rose from 27 percent in 2006 to 37 percent in 2011 by 

value. Exports to Asia were relatively stable during this period at about 28 percent.14 

Exports to the EU-27, the fourth largest destination market, declined over the period 

because of tariff-rate quotas (TRQs) that restricted access to this market.15 On the other 

hand, exports to a number of countries, including Angola, China, and Iraq, rose by more 

than 150 percent during 2006–11 by volume.16

 6

 EU-27 consumption grew 19 percent during 2006–11. USDA, FAS, PSD Online (accessed 

February 6, 2012). 7

 Per capita consumption had its highest year-to-year growth (12 percent) in 2010 because of strong 

domestic demand and increased domestic supply. These in turn resulted from strong domestic prices and 

weak export demand owing to poor economic conditions in some export markets. Knight, “Brazil Turning to 

Buoyant Domestic Market,” April 1, 2011; industry representatives, interview by USITC staff, Paraná, 

Brazil, August 30, 2011. 8

 USDA, FAS, Brazil: Poultry Annual 2011, September 2, 2011, 1, 3; USDA, FAS, Brazil: Poultry; 

Semi-annual, February 3, 2011, 2; USDA, USDA Agricultural Projections to 2020, February 2011, 13, 18. 9

 USDA, FAS, Brazil: Poultry Annual 2011, September 2, 2011, 1, 3; USDA, FAS, Brazil: Poultry; 

Semi-annual, February 3, 2011, 2; USDA, FAS, Brazil: Poultry Annual, September 22, 2009, 2. 10 USDA, FAS, Brazil: Annual Poultry Report 2008, September 3, 2011, 5. 11 The exception was in 2009, when it was the second-largest exporter after the United States. Brazilian 

exports surpassed those from the United States for the first time in 2004. USDA, FAS, PSD Online (accessed 

July 20, 2011; February 6, 2012). 12 PwC, “Sectorial Analysis; Poultry,” July 2011, 15. 

13 For the purposes of trade data in this chapter, the “Asia” region does not include the Middle East or 

former Soviet republics. GTIS, Global Trade Atlas database (accessed February 7, 2012). 14 GTIS, Global Trade Atlas database (accessed February 7, 2012). 15 The EU-27 maintains TRQs to control the entry of poultry meat imports. These include TRQs on 

cooked chicken and turkey and on uncooked salted poultry, which were established in 2007. European 

Commission, Commission Regulation (EC) No. 616/2007, June 4, 2007; EC, Commission Regulation (EC) 

No. 580/2007, May 29, 2007; USDA, FAS, EU: Poultry Sector Growth to Slow in 2011, September 1, 2010, 

1–2, 6; USDA, FAS, EU: Poultry and Products; Semi-Annual, April 9, 2010, 4; U.S. government official, 

e-mail to USITC staff, April 4, 2011. 16 GTIS, Global Trade Atlas database (accessed February 6, 2012). 
8-4 

TABLE 8.3 Brazil: Broiler exports to selected markets, 2006–11 

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

 1,000 mt Percent

 Saudi Arabia 339 380 400 496 551 623 13

 Japan 323 332 422 308 386 444 7

 Hong Kong 295 357 415 428 331 339 3

 EU-27 415 438 318 299 271 286 –7

 United Arab Emirates 147 195 208 212 208 215 8

 China 27 12 1 24 122 196 48

 South Africa 195 193 147 161 181 195 0

 Venezuela 123 160 317 165 164 177 8

 Kuwait 100 123 164 205 175 155 9

 Iraq 4 32 56 142 104 133 102

All other 745 940 988 997 1,135 987 6

 Total 2,713 3,162 3,437 3,438 3,630 3,750 7

Source: GTIS, Global Trade Atlas database (accessed February 6, 2012). 

Note: Totals may not add due to rounding. 

In 2009, 51 percent of Brazil’s poultry exports were sold as cuts, 39 percent were whole, 

5 percent were processed, and 5 percent were salted.17 Brazil’s whole birds are favored in 

Middle Eastern markets, while specific cuts are preferred by customers in Japan and 

Hong Kong. The United States largely exports to other third-county markets, in particular 

its North American Free Trade Agreement (NAFTA) partners Mexico and Canada. Brazil 

and the United States compete most directly in China (including Hong Kong) 

(figure 8.1). 

Industry Structure 

Brazil’s broiler flock is heavily concentrated in the South and Southeast regions of the 

country (table 8.4). In 2010, about one-half of Brazil’s poultry was located in the South 

and 27 percent in the Southeast. That year, Paraná, a southern state, had the largest 18

poultry flock size, accounting for 24 percent of the country’s broilers. The South and 

Southeast are the major poultry-producing regions because of their favorable climate and 

proximity to major cities (including São Paulo and Rio de Janeiro). Poultry producers in 19

these regions also reportedly benefit from access to specialized labor.20

 17 UBABEF, Relatório Annual 09/10 [Annual Report 09/10], 20 (accessed June 14, 2011). This source 

also has a breakdown of the cuts of poultry (whole, processed, salted, etc.) sold to each market. 18 IBGE, SIDRA; IBGE, Produção da pecuária muncipal 2009 [Municipal livestock production 2009], 

2009. IBGE bases its flock and herd estimates on a census. Flock size serves only as a snapshot of production 

because of the short life cycle of poultry, such as broilers, which have a typical lifespan of 45 days. 

Desouzart, “Structural Changes in the Brazilian Poultry Sector,” 2007, 30. 19 Desouzart, “Structural Changes in the Brazilian Poultry Sector,” 2007, 33–35. 20 Industry representatives, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 
FIGURE 8.1 Brazil and the United States largely exported broilers to different markets in 2011 

Source: Compiled by USITC staff using data from GTIS, Global Trade Atlas database (accessed February 6 and 13, 2012). 

8-5 
8-6 

TABLE 8.4 Brazil: Flock size by region and top six producing states, various years 

1995 2000 2005 2010 

Average change 

1995 to 2010

 1,000 birds Percent

South 273,485 326,616 402,957 527,170 93

Southeast 145,545 186,289 223,621 279,238 92

Center-West 28,517 50,864 82,852 104,903 268

Northeast 71,128 76,504 84,818 98,561 39

North 22,488 18,973 18,220 17,696 –21

 Total 541,163 659,246 812,468 1,027,568 90

Paraná 89,020 123,293 151,815 242,077 172

São Paulo 78,765 106,465 133,672 177,660 126

Santa Catarina 73,718 111,562 142,412 157,359 113

Rio Grande do Sul 110,747 91,761 108,731 127,734 15

Minas Gerais 44,235 63,560 67,619 75,211 70

Goiás 9,638 18,664 31,801 44,124 358

Source: IBGE, SIDRA; IBGE, Produção da pecuária muncipal 2009 [Municipal livestock production 2009], 2009.

Between 1995 and 2010, the size of the national flock rose by 90 percent. This expansion 

was driven by rising domestic consumption and exports, which increased 152 percent and 

643 percent, respectively, over that period (table 8.4). Since 1995, the largest increase 21

in flock size has occurred in the Center-West. The expansion of poultry production 22

toward the Center-West states is attributed to increased availability of feed, as production 

of soybeans and corn (the two main ingredients) expanded into the region. However, a 23

shortage of labor is causing production growth to slow in the Center-West. Reportedly, 24

some companies are changing their business models by transporting grain from the 

Center-West region to poultry facilities in the South and Southeast, where labor is more 

abundant. Some industry representatives believe that significant improvements in 25

infrastructure are needed for the expansion of poultry production to the Center-West to 

continue.26

Brazilian and U.S. industrial structures and production processes for poultry are very 

similar, resulting in some of the most efficient and low-cost production in the world (for 

more detail, see “Primary Factors Affecting Competitiveness,” below) (figure 8.2). 27

Both countries have similar stages of production, including hatcheries, where birds are 

incubated and born; farms, where birds are “grown out” to market weight;28 feed mills, 

where corn, soybean meal, and other inputs (such as minerals and vitamins) are combined 

 21 Based on metric tons. USDA, FAS, PSD Online (accessed September 21, 2011). 22 IBGE, SIDRA; IBGE, Produção da pecuária muncipal 2009 [Municipal livestock production], 2009. 23 Desouzart, “Structural Changes in the Brazilian Poultry Sector,” 2007, 39–45. 24 Industry representatives, interview by USITC staff, Paraná, Brazil, August 22, 2011. 25 Ibid. 

26 Industry representatives, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 27 Industry representative, interview by USITC staff, Washington, DC, June 22, 2011; industry 

representative, interview by USITC staff, Paraná, Brazil, August 31, 2011. 28 About 70 percent of Brazilian chicks are raised by contract farmers. The remaining 30 percent are 

raised in barns owned and operated by the integrators themselves, mostly in the states of Minas Gerais and 

São Paulo. PwC, “Sectorial Analysis; Poultry,” July 2011, 11. In the United States, 99 percent of broiler 

chicks are grown out by contract farmers. MacDonald, The Economic Organization of U.S. Broiler 

Production, June 2008, 7; industry representative, telephone interview by USITC staff, July 5, 2011; 

Martinez, Vertical Coordination of Marketing Systems, May 2002, 3. 
8-7 

Source: Compiled by USITC staff.

FIGURE 8.2 The United States and Brazil have similar vertically integrated broiler production and 

marketing processes 

 eggs meat 

 

 

 day-old chicks feed broilers finished product 

 

into feed;29 processing plants, where birds are slaughtered and processed into a finished 

product; and further processing plants, where meat is processed into such products as 

ready-to-cook meals and marinated items.30 In Brazil, as in the United States, vertically 

integrated companies, known as “integrators,” normally own hatcheries, feed mills, and 

processing plants.31 Integrators typically contract to independent “grow-out” farmers for 

raising day-old chicks to market weight. In such arrangements, the integrators provide the 

chicks, feed, and veterinary care, while the contract farmers provide housing, water, and 

care for the broilers. 

However, the production systems in both countries have differences, most notably in 

processing plants and chick procurement, which affect Brazil’s competitiveness. 

Processing plants in Brazil tend to be more labor-intensive than those in the United 

States, with greater volumes cut and packaged by hand; this characteristic gives Brazilian 

integrators a greater ability to produce specialized products.32 Brazilian integrators also 

use air-chilling, a technology in which cold air in tunnels is used to lower the product 

temperature.33 U.S. plants typically use water or immersion chilling, where cold water is 

 29 For feed, while corn and soybean meal are the main ingredients, some Brazilian integrators use other 

ingredients, such as palm by-products and sorghum, based on availability and price. Industry representative, 

interview by USITC staff, Paraná, Brazil, August 31, 2011.The use of substitutes for corn and soybean meal 

is uncommon in the United States. 30 It is possible to have a stand-alone slaughterhouse, but most integrators have combined 

slaughterhouse/processing plants. 31 MacDonald, The Economic Organization of U.S. Broiler Production, June 2008, 3. 32 Industry representatives, interviews by USITC staff, Paraná, Brazil, August 30–31, 2011; industry 

representatives, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 33 Carroll and Alvarado, “Comparison of Air and Immersion Chilling,” 2008; USDA, FAS, China: 

Sales of Chicken Paws, December 15, 2006, 12; Encyclopedia Britannica, “Poultry Processing,” 2011; Meyn, 

“Air Chilling” (accessed September 26, 2011). 

Primary 

breeding 

companies 

Hatcheries

Grow-out Farms 

Feed mill Processing plant 

Independent 

further 

processor 

End Customers: 

- Retail outlets 

- Foodservices/restaurants 

- Export 
8-8 

used to lower carcass temperature before the meat is placed in a chiller.34 These systems 

result in higher water content in some U.S. packaging, which is a competitive 

disadvantage for U.S. products compared to Brazil. In addition, in Brazilian plants, it is 

illegal to use chlorine rinses or other pathogen reduction treatments (PRTs), the use of 

which are common in the United States. This rule can result in waste if pathogens are 

detected;35 however, it helps facilitate Brazilian exports to the EU-27, where poultry 

treated with PRTs is banned, and Russia, where chlorine rinses are banned. Finally, many 

medium-sized Brazilian poultry producers purchase at least some day-old chicks from 

other integrators, rather than sourcing them all from company-owned hatcheries, as is 

normal in the United States.36 As discussed in the “Cost of Production” section below, 

this results in higher Brazilian chick costs. 

Companies producing poultry meat in Brazil can be broadly classified into one of three 

types: (1) large, multinational poultry producers, all of which consistently export in large 

quantities; (2) medium-sized companies, which export on a much smaller scale; and (3) a 

large number of smaller producers, which only supply the domestic market. 37 An 

increasing share of Brazilian poultry production is accounted for by the largest firms. 

Three major companies, Brasil Foods (BRF), Marfrig Frigoríficos e Comércio de 

Alimentos S.A. (Marfrig), and Doux Frangosul S/A Agro Avícola Industrial (Doux 

Frangosul), jointly accounted for about one-half of national exports in 2009. All three 

operate vertically integrated production facilities, and BRF and Marfrig are also 

horizontally integrated into other meat, egg, and processed-food activities. As described 

in detail in chapter 5, during 2006–11, BRF38 and Marfig39 became the two largest 

poultry producers in Brazil, through mergers and acquisitions, and both companies have 

production facilities outside of Brazil. Doux Frangosul is a subsidiary of the French 

poultry integrator Doux Group and only produces broilers.40 

 34 Carroll and Alvarado, “Comparison of Air and Immersion Chilling,” 2008; USDA, FAS, China: 

Sales of Chicken Paws, December 15, 2006, 12; Encyclopedia Britannica, “Poultry Processing,” 2011. 35 Instead of PRTs, Brazilian plants have a “critical control point” where all birds are inspected for 

imperfections. Those imperfections are cut out of the birds. However, a batch of chicken will be destroyed if 

a pathogen is found in many of the chickens. As a result, Brazilian plants typically have a higher percentage 

of waste than U.S. plants. Industry representatives, interview by USITC staff, São Paulo, Brazil, August 23, 

2011; industry representatives, interview by USITC staff, Paraná, Brazil, August 30, 2011. 36 Industry representatives, interview by USITC staff, São Paulo, Brazil, August 25, 2011; industry 

representatives, interview by USITC staff, Paraná, Brazil, August 30, 2011; industry representatives, 

telephone interview by USITC staff, June 15, 2011. 37 Industry representatives, telephone interview by USITC staff, June 15, 2011. 38 BRF was created by the merger of Sadia S.A. and Perdigão S.A., which was finalized in July 2011. 

Reuters, “Brazil Foods to Sell Excelsior Stake,” July 21, 2011; industry representatives, interview by USITC 

staff, Paraná, Brazil, August 22, 2011; Moser, “Brasil Foods Starts Putting Properties Up for Sale,” July 26, 

2011. 39 Marfrig first entered the poultry market in 2008 by acquiring Moinhos Cruzeiro do Sul Ltda. and 

three other Brazilian poultry companies from the OSI Group. The Poultry Site, “Marfrig Buys OSI in Brazil 

and Europe,” June 24, 2008. Marfrig established itself as Brazil’s second-largest poultry producer and 

exporter by acquiring Seara Alimentos S.A. (Seara). Watt Poultry, “Watt Poultry Top Companies: Brazil,” 

June 23, 2011; Marfrig, “Group History,” http://marfoodusa.com/historyAccordian.html (accessed July 27, 

2011). 40 Doux Group entered the Brazilian market in 1998 with the purchase of Frangosul, which was a 

top-five Brazilian poultry producer at the time. Watt Poultry, “Watt Poultry Top Companies: Brazil,” 

June 23, 2011. 
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Half of all Brazilian poultry exports are conducted by medium-sized companies. While 

the majority of these are Brazilian companies, some, such as Tyson do Brasil, are 

foreign-owned.41 Some medium-sized poultry producers are co-operatives, such as Coop 

Agroindustrial Consolata (Copacol), that operate vertically integrated poultry processing 

facilities for their member farmers. 42 In contrast to the top three companies, not all 

medium-sized companies are entirely vertically integrated. For example, they may not 

produce enough day-old chicks from their own hatcheries for all their needs and must 

therefore purchase some of their chicks from other parties, which increases their 

delivered cost. 43 Although the Brazilian poultry industry is becoming increasingly 

concentrated, a large number of small poultry producers continue to serve only the 

domestic market.44

Primary Factors Affecting Competitiveness 

Several factors affect the competitiveness of Brazil’s broiler industry in third-country 

export markets. One of the most important factors affecting competiveness generally is 

production cost. A comparison of the cost of production data for live birds in 2011 shows 

little difference between Brazil and the United States, mostly because of comparable 

costs for feed—by far the most important cost component in live bird production. Both 

Brazilian and U.S. producers have seen profitability squeezed in recent years because of 

rising feed costs, driven by higher global prices of soybeans and corn. The most notable 

cost difference between the two countries in 2011 was the higher cost of chicks in Brazil 

compared to the United States. Overall, however, the cost of production for live birds 

does not currently give Brazilian or U.S. exports a significant competitive advantage 

against each other in third-country markets. Despite rising feed costs, Brazil and the 

United States are the most efficient and lowest-cost broiler producers in the world, giving 

both countries a competitive advantage against producers in third-country markets. 

The competitiveness of Brazilian broiler exports is bolstered by product differentiation 

and efforts by Brazilian authorities to overcome sanitary and other barriers that exclude 

Brazilian products from certain overseas markets. Brazil’s willingness to differentiate its 

exports by offering a wide range of poultry products for different importing countries has 

helped Brazil gain market share in a number of third-country markets. Actions by the 

government to mitigate concerns over the safety of Brazilian poultry in global markets 

also enhance Brazilian export competitiveness. For example, the Brazilian government 

certifies its poultry as free of avian influenza (AI), in many cases giving it an advantage 

over U.S. poultry, which faces bans related to low-pathogen AI (LPAI) in certain foreign 

markets. 

Offsetting the competitive advantages enjoyed by Brazilian poultry exporters are high 

transportation costs, the relatively high value of the real, and rising labor costs. These 

factors negatively affect all agricultural sectors in Brazil and are not specific to poultry. 

 41 Tyson do Brasil is a subsidiary of Tyson Food Inc., a U.S.-owned multinational company. UBABEF, 

Relatório Annual 09/10 [Annual Report 09/10], 7–9 (accessed June 14, 2011), 42 Industry representatives, interview by USITC staff, Paraná, Brazil, August 29, 2011. 43 Industry representatives, interview by USITC staff, São Paulo, Brazil, August 25, 2011; industry 

representatives, interview by USITC staff, Paraná, Brazil, August 30, 2011. 44 Industry representative, telephone interview by USITC staff, June 15, 2011. 
8-10 

Transportation costs encompass delivery of the finished products from the factory to the 

port, usually by refrigerated truck, as well as port and shipping expenses. High 

transportation costs, largely resulting from poor Brazilian infrastructure, continue to be a 

long-term challenge for Brazilian poultry exporters (see chapter 3). Both Brazilian and 

U.S. broiler industry representatives acknowledge that the competitiveness of Brazil’s 

broiler meat exports is weakened by the real’s appreciation (see chapter 4).45 This is 

because export prices are set in U.S. dollars, and many of Brazil’s important poultry 

export markets have currencies pegged to the dollar. Historically, labor costs were lower 

in Brazil than the United States, which enhanced Brazilian competitiveness. However, 

this advantage for poultry production is being eroded as Brazilian labor costs rise, due to 

a general increase in wages for most Brazilian industries and labor shortages in certain 

Brazilian poultry-producing regions (see chapter 4).46 

Cost of Production 

The cost of the live bird is the main component of broiler meat production costs47 and a 

major determinant of international competitiveness. The cost of raising live birds to 

slaughter weight encompasses spending on feed (the single largest input cost),48 chicks, 

grower payments, and a variety of other smaller expenses, such as veterinary expenses 

and delivery of the birds to the processing plants (table 8.5). Grower payments capture 

the costs of raising birds.49 Production costs vary both between countries and between 

regions within a country. The most recently available live bird production costs 

information for the United States is a national estimate based on June and July 2011 data. 

These data were compared with Brazilian data from June and July 2011 for conventional 

grow-out houses. Since Brazilian data are available only on a state basis, two states were 

chosen as representative of Brazil.50 Paraná (in the South region) was chosen because it is 

the largest poultry producing and exporting state in Brazil, and Goiás because it the 

largest producing state in the Center-West region, the area with the most rapid production 

growth. Since Brazilian data were denominated in reais, they were converted into U.S. 

dollars to allow a cost comparison between the two countries. For this conversion, the 

actual average exchange rate for June and July 2011 (R$1.58 per dollar) was used. Also,

 45 Industry representatives, interview by USITC staff, São Paulo, Brazil, August 25, 2011; industry 

representatives, interview by USITC staff, Washington, DC, November 3, 2011. 46 Industry representatives, interview by USITC staff, São Paulo, Brazil, August 25, 2011; industry 

representatives, interview by USITC staff, Washington, DC, June 22, 2011; industry representatives, 

interview by USITC staff, São Paulo, Brazil, August 23, 2011. 47 Other costs, such as processing and transportation to the port, will affect the price of the product 

actually exported (e.g., broiler meat), but these costs are not available for both Brazil and the United States 

for comparison purposes. 48 In both Brazil and the United States, feed is the most expensive input in broiler meat production, 

generally accounting for about 65–75 percent of production costs. The Poultry Site, “High Feed Prices,” 

January 2009; The Poultry Site, “Formulating Feed for Broiler Performance,” August 2005; The Poultry Site, 

“What Does 2009 Hold for Feed Prices?” December 5, 2006; Desouzart, “Structural Changes in the Brazilian 

Poultry Sector,” 2007, 45. 49 Grower payments include the cost of labor, housing, and water. A grower payment in the United 

States is the lump sum that integrators pay to contract farms. To construct a grower payment for Paraná and 

Goiás, we took total producer costs plus water (a cost covered by U.S. contract farmers). CONAB, “Custo de 

Produção de Frangos” [Production cost of chicken], June and July 2011 (accessed September 8, 2011); IMF, 

exchange rates (accessed September 22, 2011). 50 A national Brazilian average is not available; however, state data are available. CONAB, “Custo de 

Produção de Frangos” [Production cost of chicken], June and July 2011 (accessed September 8, 2011). 
8-11 

TABLE 8.5 Live broilers: Average costs of production at various R$/$ exchange rates, mid-year 2011a ($/kg) 

 United 

States 

National 

 Brazilb

Paraná Goiás Paraná Goiás Paraná Goiás

 (actual) (actual) (hypothetical) (hypothetical) 

 R$1.58/$1 R$1.50/$1 R$2.00/$1 

Chicks 0.11 0.19 0.26 0.20 0.27 0.15 0.20 

Feed 0.69 0.67 0.70 0.70 0.73 0.53 0.55 

Grower paymentc 0.12 0.13 0.14 0.13 0.15 0.10 0.11 

All other 0.08 0.07 0.09 0.07 0.09 0.05 0.07 

 Total 1.01 1.05 1.19 1.10 1.25 0.83 0.94 

Source: CONAB, “Custo de Produção de Frangos” [Production cost of chicken], June and July 2011(accessed 

September 8, 2011); Industry official, e–mail to USITC staff, September 4, 2011; IMF, Exchange rates (accessed 

November 4, 2011). 

 aBased on the average of June and July 2011. 

 bBased on conventional grow-out houses. 

 cBrazilian grower's payment is constructed based on producer (grow-out farmer) total costs plus water.

because the cost comparison is sensitive to the chosen exchange rate, Brazilian costs are 

shown for a weak (R$2.00 per dollar) and strong (R$1.50 per dollar) value of the real. 

These rates are within the range of the highest and lowest exchange rates for 2006–10.51

Based on mid-year 2011 data, Brazil and the United States had similar live broiler 

production costs (using the actual average exchange rate of R$1.58 per dollar). Paraná’s 

production costs were 4 percent above the United States’ cost of production; those in 

Goiás were 18 percent higher. Brazil and the United States had similar overall costs of 

production largely because of comparable feed costs ($0.69 per kg of live bird for the 

United States compared to $0.67–$0.70 for Brazil), by far the largest cost component in 

poultry production. Feed costs in both countries were similar because of the increasing 

globalization of corn and soybean prices:52 owing to the integration of the global market 

and the large volume of soybeans sold globally, soybean prices in Brazil closely align 

with the Chicago Board of Trade prices. 53 However, Brazilian soybean prices are 

adjusted for domestic transportation, which contributes to the differences in feed prices 

between Brazilian states. Brazilian corn prices are reportedly less closely aligned with 

international prices because corn is primarily marketed regionally within the domestic 

market in Brazil.54 In 2011, both Brazilian and U.S. poultry producers faced high feed 

 51 IMF, Exchange Rates database (accessed November 4, 2011). 52 Poultry feed is normally made of corn and soybean meal, along with different minerals and additives. 

The exact composition of feed varies depending on the country, the age of the broiler chick, and the 

company, as integrators formulate their own mixes. Generally, about 68 percent of feed is made of corn and 

26 percent from soybean meal. USDA, FAS, Oilseeds: World Markets and Trade, October 2011, table 30. 

Crop year is October through September. 53 Industry representative, interview by USITC staff, Paraná, Brazil, August 29, 2011; industry 

representatives, telephone interview by USITC staff, June 15, 2011; industry representatives, interview by 

USITC staff, June 22, 2011. 54 Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 2011. 
8-12 

costs that eroded industry profitability (box 8.1). 55 Brazilian costs of production were 

slightly higher than in the United States owing to higher chick costs in Brazil.56 Chicks 

cost are higher in Brazil primarily because many Brazilian integrators purchase at least 

some day-old chicks from breeders, as opposed to buying eggs for their own hatcheries, 

as is common in the United States. Buying the day-old chicks can raise costs as much as 

30 percent compared to raising eggs from company-owned hatcheries.57

BOX 8.1 The Rise in Global Feed Prices 

High feed costs raise the cost of production for meat producers. If producers are not able to pass on their rising feed 

costs by increasing prices, the profitability of meat erodes. This was the case for poultry producers for parts of 2006–

11, when a weak global economy reduced poultry demand and kept poultry prices low even though animal feed costs 

were generally high. The cost of animal feed is driven largely by the prices of corn and soybeans, which are affected 

by such factors as weather, fuel and energy prices, demand levels, and government policies. Globally, corn and 

soybean prices were volatile during 2006–11. They rose between the 2005/06 and 2007/08 crop years and rose 

again in 2010/11 after declines in 2008/09 and 2009/10, which were caused by the worldwide recession of 2008–09 

and by higher production.a

Global corn and soybean prices were high for much of 2006–11 because of both long-term trends that began in 2002 

and short-term phenomena that caused price spikes in some years. Factors that helped to raise prices since 2002 

were (1) growth in both world population and per capita incomes, which increased demand;b

 (2) expanding biofuel 

production, further increasing demand;c (3) the depreciation of the U.S. dollar, which lowered relative prices and 

increased global demand, especially for products with prices denominated in U.S. dollars; (4) increasing worldwide 

energy prices that inflated the cost of energy-intensive crop production inputs, especially fertilizer; and (5) a decline in 

the growth rate of agricultural productivity, which restricted supply.d

 Between 2006 and 2011, short-term factors 

contributing to the increase in corn and soybean prices weree

 (1) bad weather, primarily droughts, in major grain- and 

oilseed-producing countries, including Russia, Ukraine, Australia, and the United States, which reduced world supply; 

(2) export controls established by some governments to combat domestic food price inflation, which further reduced 

supply;f

 (3) government purchases to replenish depleted public stores, which increased demand; and (4) price 

controls set by governments in some countries, which further increased demand for artificially cheaper commodities. 

_____________ 

 a Trostle et al., Why Have Food Commodity Prices Risen Again? June 2011, 9; USITC, Shifts in U.S. Merchandise 

Trade 2008, July 2009, AG-13; USDA, ERS, Data Sets: Feed Grains Database; Yearbook; Feed Yearbook Table 12 

(accessed April 28, 2011); USDA, ERS, Data Sets: Feed Grains Database; Yearbook; Oil Crops Yearbook Table 4 

(accessed April 28, 2011). Corn price is the average of the cash price of number 2 yellow corn in all principal markets 

for the year. 

 b In particular, there is strong Chinese demand for soybeans. c For example, increased use of corn for ethanol; use of U.S. corn for ethanol use rose from 10 to 24 percent of 

production between crop years 2002/03 and 2007/08. USITC, Shifts in U.S. Merchandise Trade 2008, July 2009, AG7 and AG-13; Trostle, Global Agricultural Supply and Demand, July 2008, 16. d Trostle et al., Why Have Food Commodity Prices Risen Again? June 2011; USITC, Shifts in U.S. Merchandise 

Trade 2008, July 2009, AG-7, AG-13; Trostle, Global Agricultural Supply and Demand, July 2008, 16; Asian 

Development Bank, Soaring Food Prices: Response to the Crisis, 2010. e Trostle, Global Agricultural Supply and Demand, July 2008, 20–21; USDA, ERS, Oil Crops Outlook, June 10, 

2011, 1–3; Trostle et al., Why Have Food Commodity Prices Risen Again?, June 2011. f For example, Argentina raised the export taxes on corn and soybeans, and China imposed an export tax on 

grains. Trostle, Global Agricultural Supply and Demand, July 2008, 23–24. 

 55 O’Keefe, “Coping with High Feed Prices,” June 2008, 18–20, 5; USDA, ERS, Livestock, Dairy, and 

Poultry Outlook, December 17, 2009, 13; Thornton, “Tyson Foods Focuses on Chicken Pricing,” August 11, 

2011; Johnston, “Butterball to Close Plant Due to High Input Costs,” September 15, 2011; Kavilans, “U.S. 

Places $40 Million Chicken Order,” August 16, 2011; Thornton, “Chicken Executives Seek Profitability,” 

November 14, 2011; World Bank, “Food Price Watch,” February 2011; industry officials, interview by 

USITC staff, São Paulo, Brazil, August 23, 2011. 56 Chick costs were 68 percent higher in Paraná and 128 percent higher in Goiás (Table 8.5). 57 Industry representative, e-mail to USITC staff, November 9, 2011. 
8-13 

Exchange rates have a major effect on Brazilian competitiveness, which weakens vis-àvis the United States as the real appreciates against the dollar. Two theoretical exchange 

rates (R$2.00 and R$1.50 per dollar) can be used to show how exchange rates affect 

Brazil’s live broiler production costs (table 8.5). Given current cost structures, if the real

depreciated to R$2.00 per dollar, broiler production costs would be lower in Paraná and 

Goiás than in the United States by 18 percent and 7 percent, respectively. But if the real

appreciated to R$1.50 per dollar, U.S. costs would be 9 percent lower than in Paraná and 

24 percent lower than in Goiás, giving U.S. exporters a substantial cost advantage.58 

As mentioned earlier, while the overall Brazilian and U.S. costs of production for live 

broilers are very similar, they are low by international standards. This is because the 

broiler sectors of both countries are the most highly efficient, and thus competitive, 

producers in the world.59 A 2009 study compared live broiler production costs in the 

Netherlands with those in Germany, France, the United Kingdom, Poland, the United 

States, Brazil, and Thailand.60 The study found that U.S. and Brazilian production costs 

were 32 and 33 percent lower, respectively, than those in the Netherlands, largely due to 

lower feed costs resulting from an abundant local supply of feed ingredients. They were 

also lower than broiler production costs in all comparison countries. This study projected 

that by 2012, new EU-27 rules in several areas—stocking densities (the number of birds 

permitted to be housed in a specified area), emissions standards, and diseases—will 

increase live broiler costs in the EU-27 even further, compared to the United States and 

Brazil. 

Product Differentiation 

Product differentiation is an important competitive advantage for Brazilian poultry 

exporters. Brazil’s poultry industry is highly export-oriented, with firms willing to 

modify production and packaging to meet customer needs.61 This export orientation arose 

because historically domestic demand was relatively low compared with supply, with 

consumption limited by low incomes and a historical preference for beef.62 This is in 

contrast to the poultry industry in the United States, which is primarily focused on 

supplying the large domestic market. Moreover, U.S. producers operate plants that, 

unlike those in Brazil, are not designed for producing specialized items.63 Therefore, U.S. 

producers have limited ability to differentiate their products and to comply with the 

production, processing, and labeling requirements of multiple countries.64 As a result of 

 58 For this exercise, no changes were made to the current cost structure, nor were adjustments made to 

account for any direct or indirect dynamic effects that exchange rate fluctuations would have (such as 

lowering the cost of imported inputs such as fertilizer, which would indirectly affect feed costs). 59 For example, the EU-27 has a high cost structure, which hurts its competitiveness. High costs are 

caused by a number of regulations and laws (many of which reflect societal preferences), as well as high 

costs for feed, energy, labor, land, and capital. EC, Prospects for Agricultural Markets and Income, 

December 2010, 27. 60 Data are from 2007. Van Horne, Production Costs of Broiler Meat, 2009. 61 See, for example, Shane, “Has the ‘Brazilian Giant’ Stumbled?” January 2007, 21; industry 

representatives, telephone interview by USITC staff, June 15, 2011; The PoultrySite.com, “BRF Starts 

Further Processing Plant in the Middle East,” August 15, 2011; industry representatives, interview by USITC 

staff, São Paulo, Brazil, August 25, 2011. 62 Industry representatives, telephone interview by USITC staff, June 15, 2011; industry 

representatives, interview by USITC staff, Washington, DC, June 22, 2011; industry representatives, 

interview by USITC staff, São Paulo, Brazil, August 23, 2011. 63 Shane, “Has the ‘Brazilian Giant’ Stumbled?” January 2007. 64 Ibid.
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these factors, the United States mostly exports dark meat products. 65 While dark meat 

generally commands higher prices abroad, the limited ability to meet foreign market 

requirements and preferences restricts export opportunities, and thus potential profits, in 

some markets. 

Specialized Production and Packaging 

Brazil has developed export-oriented production processes 66 that focus on “feed 

formulation” and bird size to meet specific preferences in different overseas markets.67

Conversely, U.S. plants are set up in a way that gives them limited scope to differentiate 

their products or to comply with multiple countries’ production, processing, and labeling 

requirements.68 For example, Brazilian integrators operate complete halal69 production 

systems, allowing Brazil to be a major supplier to Islamic countries. According to 

Brazilian poultry industry officials, it is expensive to have multiple production lines in a 

factory (i.e., halal and non-halal). Therefore, production lines at most exporting Brazilian 

poultry facilities meet halal requirements.70 This is advantageous because producers can 

always sell halal product to non-halal markets, but not the reverse.71 Differences between 

halal and conventional production include special slaughter requirements, such as 

confirming that the bird is alive and having a Muslim say an invocation before 

slaughter.72 The slaughter must also be certified as halal by certifying bodies approved by 

the importing country. 73 Brazil also meets the requirements of individual Islamic 

countries, such as having an Iranian commission oversee the slaughter of chickens 

destined for Iran.74 The United States has much more limited halal production for a 

number of reasons, including (1) an orientation towards the domestic market, where 

demand for halal broiler products is low; (2) the cost of trying to meet the different halal 

requirements of Muslim countries, especially if plants must be separately certified by 

each destination country; and (3) concerns about profitability, because sales prices to 

some major Islamic countries are lower than those to other markets.75

 65 U.S. consumers favor white meat products, such as breast meat and wings. During 2006–10 about 

93 percent of U.S. broiler exports consisted of various cuts, and 53 percent of U.S. broiler exports were 

chicken leg quarters, a dark meat cut. In comparison, during that five-year period only about 57 percent of 

Brazil’s broiler meat exports were of cuts and 38 percent were of whole birds. GTIS, Global Trade Atlas 

database (accessed September 26, 2011). 66 Feed mills, grow-out farms, and processing facilities. 

67 Shane, “Has the ‘Brazilian Giant’ Stumbled?” January 2007, 21. 68 Shane, “Has the ‘Brazilian Giant’ Stumbled?” January 2007. 69 Halal is an Arabic word meaning lawful or permitted. There are currently no universal halal food 

production standards or certifications. See, for example, USDA, FAS, Indonesia: Approved U.S. Halal 

Certifying Bodies, March 22, 2011; USDA, FAS, Malaysia: Poultry and Products Annual, September 2, 

2005, 7–9; USDA, AMS, International Egg and Poultry Review, June 26, 2007. 70 Industry representative, interview by USITC staff, Paraná, Brazil, August 22, 2011. The Brazilian 

Chicken Producers and Exporters Association notes that of the 33 members that are responsible for about 94 

percent of Brazilian exports, 30 have halal production lines. BRChicken, “Brazil’s Rigorous Production of 

Halal Chicken,” February, 2010, 8-e. 71 Industry representative, interview by USITC staff, Paraná, Brazil, August 22, 2011. 72 BRChicken, “Brazil’s Rigorous Production of Halal Chicken,” February, 2010, 4-e to 5-e. 73 BRChicken, “Brazil’s Rigorous Production of Halal Chicken,” February, 2010, 4-e to 5-e; 

government official, interview by USITC staff, Washington, DC, November 3, 2011. Brazil, like the United 

States, has a number of certifying organizations, the largest of which are the Brazilian Islamic Center for 

Halal Food (CIBAL) and the Center for Islamic Information in Latin America (CDI-AL). 74 BRChicken, “Brazil’s Rigorous Production of Halal Chicken,” February, 2010, 5-e. 75 World Perspectives, Developing a Competitive U.S. Halal Food Industry Export Sector, 

August 2005, 6; government official, interview by USITC staff, Washington, DC, November 3, 2011. 
8-15 

In addition, Brazilian integrators are willing to supply specific types of products that are 

in demand in certain export markets. For the Arab market, for example, Brazilian 

exporters produce a “griller,” which is a small whole chicken weighing between 0.9 and 

1.3 kg (about 2.0 to 2.8 lbs.), and a “shawarma,” which is a boneless whole bird.76

Brazilian integrators also make products specifically for other markets, such as Japan, 

where there is demand for specialized boneless leg cuts that requires the deboning to be 

done by hand.77

Brazilian export packaging is commonly considered to be superior to that of the U.S. 

industry.78 Brazilian packaging may differ in several respects. For example, as noted 

earlier, Brazilian integrators air-chill poultry products and freeze them immediately after 

packaging, resulting in a lower moisture content than water-chilled U.S. products. 79

Excess moisture in broiler packaging can lower meat quality and damage packaging. 

Additionally, Brazilian producers often hand-pack meat, which allows them to group 

uniformly sized pieces and align them very precisely in a package.80 Customers in many 

markets, such as Japan and the Middle East, reportedly prefer or even require this type of 

packaging, and many are willing to pay a premium for it.81 The United States, on the 

other hand, generally does bulk packaging for exports.82 In order to sell to individual 

customers, the bulk shipment must be partially defrosted, repackaged into smaller 

containers, and refrozen, which results in a product that looks less presentable, especially 

compared to Brazilian broiler meat.83 

Rising wage rates in Brazil are making specialized production and packaging more 

expensive. Historically, in addition to allowing Brazil to differentiate its products, higher 

levels of labor use (as opposed to machinery) was a cost advantage for Brazilian 

integrators because wage rates were lower than the United States. However, that 

advantage is being eroded by rising wages (see chapter 4). According to industry 

representatives, in response to rising labor costs the Brazilian poultry industry is 

increasing its mechanization, often purchasing high-speed processing equipment. 84

 76 BRChicken, “Brazil’s Rigorous Production of Halal Chicken,” February, 2010, 9-e. The smallest 

whole chicken produced commercially in the United States is generally about 1.6 kg (3.6 lb.) live weight. In 

2010, the average live weight of a chicken in the United States was 2.5 kg (5.59 lb). Industry representative, 

interview by USITC staff, Washington, DC, June 22, 2011; USDA, AMS, Weekly Fast Food Fax Report,

June 13, 2011; USDA, AMS, Weekly Fast Food Fax Report, September 26, 2011; USDA, NASS, Poultry 

Slaughter 2010 Summary, February 2011, 2. 77 Industry representatives, interview by USITC staff, Washington, DC, June 22, 2011; USDA, FAS, 

Japan: Broiler Annual; 2008, October 1, 2008, 3–4. 78 Industry representatives, interview by USITC staff, Washington, DC, June 22, 2011; USDA, FAS, 

China: Sales of Chicken Paws, December 15, 2006, 7, 13; industry representatives, presentation attended by 

USITC staff, Washington, DC, December 9, 2009. 79 USDA, FAS, China: Sales of Chicken Paws, December 15, 2006, 7, 13; Encyclopedia Britannica, 

“Poultry Processing,” 2011; industry representatives, presentation attended by USITC staff, Washington, DC, 

December 9, 2009. Lower moisture content results in less “purge” (moisture) leaking into the packaging, 

which creates a more attractive package. 80 Industry representatives, interview by USITC staff, São Paulo, Brazil, August 25, 2011; USDA, 

FAS, China: Sales of Chicken Paws, December 15, 2006, 7, 13. 81 Ibid. 

82 Industry representatives, interview by USITC staff, Washington, DC, June 22, 2011. 83 Industry representatives, presentation attended by USITC staff, Washington, DC, December 9, 2009. 

The U.S. industry is aware of the problems with its packaging and is considering a number of 

recommendations for making improvements. 84 Industry representatives, interview by USITC staff, Washington, DC, June 22, 2011; industry 

representatives, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 
8-16 

Brazilian industry representatives have stated that, despite higher labor costs, they will 

continue to do hand cutting and/or packing for customers willing to pay a premium.85

However, if prices for specialized products become too high, importers, especially in 

price-sensitive countries, may reduce their purchases from Brazil. 

Government Action to Improve Market Access 

Global meat trade is highly affected by nontariff measures (NTMs)—market access 

barriers associated with concerns over consumer health and safety. Brazil, like other 

exporters, has limited influence over such restrictions, but these measures are an 

important factor in their ability to supply a market. However, in some instances Brazil’s 

government has been able to mitigate or avoid NTMs by issuing certifications addressing 

importers’ concerns. An example of this is the issue of AI, a major sanitary and 

phytosanitary (SPS) issue affecting the poultry industry. 86 U.S. poultry products are 

partially banned by a number of countries, including China, Japan, and Russia, because 

of outbreaks of LPAI in the past few years.87 Brazilian exporters have avoided these bans 

because the Brazilian government certifies that Brazil is free of LPAI, thereby gaining a 

competitive advantage over the United States.88 Such a certification is impossible for the 

U.S. government to issue because of the presence of LPAI in the country. However, in 

general, the U.S. government is reported to issue fewer SPS certifications to avoid or 

reduce the effects of NTMs than other countries. U.S. regulators generally see this as an 

advantage, implying that the United States has higher standards for certification and that 

a certification from a U.S. government agency means more than certification from an 

agency that may be willing to bend its standards.89 However, some traders think it is a 

disadvantage, claiming that U.S. regulators have been unwilling to adjust to a changing 

trade environment.90

Key Export Markets 

Poultry is widely produced throughout the world; however, the global poultry trade is 

much more concentrated. The world’s largest producers––the United States, China, 

Brazil, and the EU-27––are also the largest consumers, which limits international broiler 

trade.91 Brazil and the United States are by far the largest exporters of broiler meat, 

accounting for about three-quarters of global exports during 2006–11. 

As noted above, Brazil and the United States largely supply different markets because of 

a number of factors, including geographic location, trade restrictions, and product 

differentiation. They compete most directly in China (including Hong Kong) and Russia. 

 85 Industry representatives, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 86 Industry representatives, interview by USITC staff, Washington, DC, June 22, 2011. 87 USDA, FSIS, “Export Requirements for the People’s Republic of China,” December 23, 2010; 

USDA, FSIS, “Export Requirements for Hong Kong,” July 6, 2011; USDA, FSIS, “Export Requirements for 

Japan,” July 12, 2011; USDA, FSIS, “Export Requirements for Russia,” March 29, 2011. The U.S. 

government contends that imposing a ban on the basis of the presence of LPAI appears to be contrary to the 

internationally accepted standard. USTR, 2009 National Trade Estimate Report, March 2009, 95. 88 Industry representatives, interview by USITC staff, Washington, DC, June 22, 2011. 89 Government official, telephone interview by USITC staff, October 18, 2010. 90 Industry representative, interview by USITC staff, Shanghai, China, September 14, 2010. 91 USDA, FAS, PSD Online (accessed February 6, 2012). 
8-17 

Other major export destinations for Brazil are Saudi Arabia, Japan, and the EU-27; for 

the United States, other major export destinations are NAFTA partners Mexico and 

Canada. 

China and Hong Kong 

Market Characteristics 

China was the second-largest broiler consumer in the world in 2011, accounting for about 

16 percent of global consumption during 2006–11.92 Chinese consumption increased in 

each year of the period, growing at an average rate of 5 percent annually, primarily 

because of increased urbanization and rising incomes (table 8.6).93 Hong Kong was the 

29th-largest global broiler consumer in 2011.94 Its consumption fell in 2007 and then rose 

again until it reached its highest level of the period in 2010. On average, about 3 percent 

of Chinese consumption and 93 percent of Hong Kong’s consumption was filled by 

imports during 2006–11. 

TABLE 8.6 China and Hong Kong: Broiler meat production, consumption, exports, and imports, 2006–11

 2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

 1,000 mt Percent 

China 

 Production 10,350 11,291 11,840 12,100 12,550 13,200 5

 Consumption 10,371 11,415 11,954 12,210 12,457 13,020 5

 Exports 322 358 285 291 379 410 5

 Imports 343 482 399 401 286 230 –8

 Trade balance –21 –124 –114 –110 93 180 (a)

Hong Kong 

 Production 29 26 18 10 10 12 –16

 Consumption 269 252 254 263 305 262 –1

 Exports (b

) (b) (b) (b) (b) (b) (b)

 Imports 243 215 236 253 295 250 1

 Trade balance (b) (b) (b) (b) (b) (b) (b)

Source: USDA, FAS, PSD Online (accessed February 6, 2012). 

a

Not applicable. 

b

Not available. 

In 2011, China was the 12th-largest importer of broiler meat in the world.95 During 2006–

11, the United States and Brazil were China’s primary suppliers, with Argentina the 

third-largest except when imports of U.S. or Brazilian poultry were restricted for reasons 

of health or subject to trade remedy actions (table 8.7). For example, in 2008, following a 

temporary ban on Brazilian imports (caused by China’s concerns that imports had entered 

 92 Ibid. 

93 USITC, China’s Agricultural Trade, March 2011, 3-1 to 3-13. 94 USDA, FAS, PSD Online (accessed February 6, 2012). Hong Kong consumption accounted for less 

than 1 percent of world broiler meat consumption annually in 2006–11. 95 China received 5 percent of global poultry imports during 2006–11. China’s imports for a number of 

agricultural products, including poultry, are reportedly understated, because official government statistics do 

not reflect “gray market” shipments—trade which typically enters through neighboring countries. Gray 

market imports may enter a country outside normal customs channels or through normal customs channels 

with modifications made to the product, such as changing the country-of-origin label to that of a third country 

unaffected by a given trade barrier. 
8-18 

TABLE 8.7 China and Hong Kong: Broiler meat imports, by supplier, 2006–11

 2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

 Million $ Percent

China 

 Brazil 119 195 0 43 529 595 38

 Argentina 25 134 240 92 229 109 34

 United States 298 589 763 792 129 58 –28

 All other 9 0 30 19 32 42 36

 Total 452 918 1,033 947 920 804 12

Hong Kong 

 United States 71 70 125 159 580 748 60

 Brazil 303 481 643 667 599 634 16

 China 130 171 197 190 231 271 16

 EU-27 35 48 43 57 131 216 44

 All other 64 74 87 111 156 176 22

 Total 603 844 1,095 1,185 1,696 2,045 28

Source: GTIS, Global Trade Atlas database (accessed February 6, 2012). 

Note: Totals may not add due to rounding. 

the country from unapproved Brazilian facilities), imports of poultry from the United 

States and Argentina sharply increased to offset the steep drop in imports from Brazil. 

Similarly, when China imposed anti-dumping (AD) and countervailing duties (CVD) on 

imports of U.S. poultry in 2010, imports from the United States plunged, while imports 

from Brazil and Argentina rose dramatically. 

During 2006–11, over 99 percent of China’s imports were frozen chicken cuts and offal, 

which are classified for tariff purposes as Harmonized Schedule (HS) code 0207.14.96

Chicken paws,97 a popular snack food, were the single largest imported item, normally 

accounting for over one-half of all poultry imports by value and volume.98 Demand for 

chicken paws is unique to China and Hong Kong and a boon for exporters who would 

otherwise sell the bulk of chicken paws at very low prices, normally as remnants (often 

used in such products as pet food). China also imports wing tips and chicken leg 

quarters.99

In 2011, Hong Kong was the seventh-largest importer of broiler meat and a major export 

market for the United States and Brazil.100 Hong Kong imports for its own consumption 

and reportedly serves as a re-export point for other markets, especially in Asia. During 

2006–09, Brazil was Hong Kong’s largest supplier, with 56 percent of broiler meat 

imports; the United States supplied about 11 percent of imports.101 However, during 

2010–11, imports from the United States accounted for 35 percent of Hong Kong’s 

broiler meat imports. Between 2008 and 2011, direct U.S. shipments to Hong Kong 

increased for a number of reasons, including the competitiveness of U.S. prices compared 

 96 By both volume and value. GTIS, Global Trade Atlas database (accessed February 6–7 2012). 97 A paw is a broiler cut that includes the foot and part of the chicken leg. USDA, FAS, China: Sales of 

Chicken Paws, December 15, 2006, 3. 98 GTIS, Global Trade Atlas database (accessed February 7, 2012). 99 Most imported chicken leg quarters are used for further processing in China and eventual re-export, 

owing to foreign buyers’ aversion to the possibility of harmful residues in Chinese broiler meat. Industry 

representative, interview by USITC staff, Hong Kong, September 20, 2010. 100 USDA, FAS, PSD Online (accessed February 6, 2012). 101 By value. GTIS, Global Trade Atlas database (accessed February 6, 2012). 
8-19 

to other suppliers and a sharp decline in imports from the EU-27 (for part of this period) 

and Argentina, raising the demand for U.S. and Brazilian product.102 In addition, while 

the Commission is aware of reports of re-exporting from Hong Kong to China, it is not in 

a position to evaluate these reports absent conclusive data. During 2006–10, the largest 

imports consisted of frozen chicken paws and chicken wings, which made up about 

40 percent and 30 percent of total broiler meat imports, respectively.103 

Government Policies Affecting Trade 

China and Hong Kong have separate customs regimes and tariff schedules. China’s tariff 

rates on poultry vary by product.104 The vast majority of the poultry meat China imported 

entered under HS 0207.14, which in 2011 had duty rates ranging between 500 and 

1,000 renminbi (RMB) per mt (about $75–$155 per mt).105 In addition to tariffs, two 

taxes are assessed on imports: a consumption tax of 2 to 3 percent based on cost, 

insurance, and freight (c.i.f.) value (the specific rate depends on the province), and a 

value-added tax (VAT) of 13 percent of the c.i.f. value plus the tariff.106 As of 2010, U.S. 

broiler meat directly entering China is also subject to CVD rates ranging from 5.1 to 

30.3 percent and AD rates ranging from 50.3 to 105.4 percent.107 Product re-exported 

through Hong Kong (or another country) to China should be subject to the same 

requirements that product from the country of origin would face if it were directly 

entering China. However, some observers suggest that this may not always happen, 

especially if products are repackaged by parties in countries where re-exports occur.108

China has imposed a number of NTMs, some only temporarily, which affect access for 

imports. Many of those with the biggest impacts are SPS measures. For example, the 

Chinese government maintains a zero-tolerance policy for bacteria such as salmonella, E. 

coli, and listeria in imports of poultry without having presented supporting scientific risk 

assessments.109 The zero-tolerance levels appear to be intermittently enforced against 

imports but not against China’s domestic production. In 2008, because of concerns about 

 102 Industry representative, e-mail to USITC staff, November 11, 2009; industry representative, 

interview by USITC staff, Hong Kong, China, September 20, 2010. Argentina’s broiler exports to China 

increased at the same time as its exports to Hong Kong declined. GTIS, Global Trade Atlas database 

(accessed March 15, 2012). 103 GTIS, Global Trade Atlas database (accessed September 9, 2011). 104 APEC, China tariff schedule (accessed April 14, 2009). 105 WTO, Tariff Download Facility (accessed August 30, 2011); IMF, Exchange Rates database 

(accessed November 14, 2011). 106 USAPEEC, “China: Tariff and Quantitative Restrictions for Poultry” (accessed September 15, 

2009); USITC, China’s Agricultural Trade, March 2011, 4-13, 4-18. 107 The investigation included the following HS codes: 0207.11.00, 0207.12.00, 0207.13.11, 

0207.1319, 0207.1321, 0207.1.329, 0207.14.11, 0207.14.19, 0207.14.21, 0207.14.22, 0207.14.29, and 

0504.00.21. USDA, FAS, China, Poultry and Products Semi-Annual 2010, April 14, 2010, 4. As permitted 

under the World Trade Organization (WTO), the United States asked China for consultation about these 

determinations. USTR, “United States Files WTO Case against China,” September 20, 2011. After 

concluding that consultations were unable to resolve the dispute, the United States requested a formal WTO 

dispute settlement panel in late 2011. USTR, “To Protect American Jobs, United States Announces Next 

Step,” December 2011. 108 Industry representative, interview by USITC staff, Hong Kong, September 20, 2010. To help 

China’s efforts to prevent illegal trade, Hong Kong is expected to start issuing voluntary certificates for 

non-U.S. poultry being transshipped to China. Entries with these certificates are expected to clear Chinese 

customs faster than those without. USDA, FAS, Hong Kong: HKG to Issue Original Certification, 

August 17, 2011. 109 USTR, National Trade Estimate Report, March 2009, 95; USITC, China’s Agricultural Trade, 

March 2011, 9-7. 
8-20 

poultry entering the country from unapproved Brazilian facilities, China banned all 

shipments from Brazil, including product from facilities that had been approved 

previously.110 Brazil’s direct shipments to China essentially stopped during 2008. China 

also imposed bans following outbreaks of LPAI through 2006–11; these bans affected 

several countries, including the United States. U.S. officials claim that such bans are 

inconsistent with World Organization for Animal Health (OIE) standards.111 

Other mechanisms, such as China’s Automatic Registration Forms for poultry imports, 

have also reportedly been used to restrict market access during periods of trade tension.112

Overall, China’s SPS policies and use of certain certifications make consistent market 

access uncertain for both Brazil and the United States. For a discussion of how China’s 

NTMs on poultry affect trade, see chapter 11. 

Hong Kong imposes no tariffs, TRQs, surcharges, or VAT on imported poultry.113 There 

have been some bans on poultry imports from certain counties (rather than entire states) 

in the United States in response to outbreaks of LPAI. For example, poultry exported 

from Edmonson County, Kentucky, during April 14–October 21, 2009, was ineligible to 

be imported into Hong Kong; poultry exported from Wright County, Minnesota, on or 

after July 4, 2011, is likewise ineligible.114 

Competition with the United States 

Paws 

Consumer demand for paws is high in China and Hong Kong, but domestic supplies, 

which are essentially a byproduct of poultry production, are insufficient to meet demand. 

As a result, there is strong demand for imports from both Brazil and the United States, 

which likely will continue for the foreseeable future. Of the total paws imported by Hong 

Kong and China during 2006–11, about 43 percent came from the United States and 

36 percent from Brazil. 115 While annual growth rates have been somewhat volatile, 

overall Hong Kong and China’s combined paw imports from Brazil increased by 

46 percent during 2006–11; imports from the United States grew 107 percent over the 

period.116 Brazilian and U.S. product differentiation plays a role in determining each 

respective country’s overall market share and the customer base to which they are most 

attractive. With regard to paw size, Chinese buyers reportedly like the medium-sized and 

large paws that Brazil supplies. 117 The medium-sized paws are typically sold to 

lower-income customers. However, U.S. paws are even larger and meatier than Brazilian 

 110 USDA, FAS, China: Poultry Annual; 2008, September 1, 2008, 6. 111 USTR, National Trade Estimate Report, March 2009, 95; USDA, FSIS, “Export Requirements for 

China,” December 23, 2010; USTR, 2010 Report on Sanitary and Phytosanitary Measures, 2010, 35. 112 The Chinese government purportedly uses these forms to keep track of the volume of imported 

poultry. However, licenses for poultry imports were reportedly delayed following U.S. imposition of duties 

on Chinese tire imports in 2009. Industry representative, interview by USITC staff, Hong Kong, 

September 20, 2010; USITC, China’s Agricultural Trade, March 2011, 9-11. 113 APEC, “APEC Customs Guide: Hong Kong” (accessed April 14, 2009). 114 USDA, FSIS, “Export Requirements for Hong Kong,” July 6, 2011 (accessed August 15, 2011). 115 Based on volume. GTIS, Global Trade Atlas database (February 7, 2012). 116 Based on imports statistics by volume. GTIS, Global Trade Atlas database (February 7, 2012). 117 USDA, FAS, China: Sales of Chicken Paws, December 15, 2006, 7, 13. 
8-21 

or locally produced paws.118 According to industry officials, their large size makes U.S. 

paws popular in larger cities and with wealthier customers.119 On the other hand, Brazil’s 

packaging is preferred to U.S. packaging because Brazilian paws are packed in smaller 

bags and are more uniformly sized.120 Reportedly, Chinese and Hong Kong importers 

also dislike excessive moisture content (a result of water chilling) in U.S. packages and 

the fact that U.S. producers are not flexible about the package sizes they make 

available. 121 U.S. officials in China have expressed concern that by not modifying 

production lines to improve paw quality, U.S. integrators are not maximizing the 

profitability of U.S. paws and have been vulnerable to competition from Brazil.122 

Broiler meat 

Since 2010, U.S. exports of broiler meat (including paws) have been at a significant price 

disadvantage in the Chinese market relative to Brazilian supplies because of the high 

AD/CVD duties imposed that year. Because of these duties, China’s direct imports from 

the United States declined 86 percent (by quantity) between 2009 and 2010, while 

Brazilian direct exports to China surged, substantially replacing the decline in U.S. 

imports.123 In 2011, China’s direct imports of U.S. broiler meat further declined.124 While 

China’s market continues to be important for U.S. and Brazilian exporters because of its 

large consumer base and rising incomes, Chinese government actions, such as those in 

2008 and 2010, pose uncertainties for firms that export directly to China.125 

Russia 

Market Characteristics 

During 2006–11, Russian poultry consumption grew 22 percent as a result of rising 

incomes (table 8.8). Russia was the sixth-largest global consumer of poultry in 2011, and 

consumers there prefer dark chicken meat.126 In 2006, about 50 percent of domestic 

consumption was supplied by imports. However, owing to efforts by the Russian 

government to promote self-sufficiency through increased domestic production, only 

13 percent of consumption was filled by imports in 2011.127

 118 USDA, FAS, China: Sales of Chicken Paws, December 15, 2006, 13; industry representative, 

interview by USITC staff, Hong Kong, September 20, 2010. 119 Ibid. 120 USDA, FAS, China: Sales of Chicken Paws, December 15, 2006, 7, 13. 121 USDA, FAS, China: Sales of Chicken Paws, December 15, 2006, 12. 122 USDA, FAS, China: Chicken Paw, Wing and Wing Tip Exports, February 7, 2007, 1. 123 GTIS, Global Trade Atlas database (accessed July 20, 2011). Overall, Chinese imports fell 

29 percent by quantity between 2009 and 2010. 124 Between 2010 and 2011, China’s imports of U.S. broiler meat fell 38 percent, by volume. GTIS, 

Global Trade Atlas database (accessed February 7, 2012). 125 Industry representatives, interview by USITC staff, Washington, DC, June 22, 2011; industry 

representative, interview by USITC staff, Hong Kong, September 20, 2010; USITC, China’s Agricultural 

Trade, March 2011, 9-11. 

126 USDA, FAS, PSD Online (accessed February 6, 2012); EIU, “Russia Food, Beverages and Tobacco 

Profile,” January 14, 2008. 127 Clements, “Russia Invests in Poultry’s Future,” August 6, 2009; Wattagnet.com, “Russia to 

Decrease Poultry Imports,” May 21, 2009; USDA, FAS, Russian Federation: Big Moves to Self-Sufficiency, 

April 6, 2010. 
8-22 

TABLE 8.8 Russia: Broiler meat production, consumption, exports, and imports, 2006–11 

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

 1,000 mt Percent

Production 1,180 1,410 1,680 2,060 2,310 2,520 16

Consumption 2,382 2,637 2,840 2,976 2,938 2,907 4

Exports 2 2 5 7 5 3 8

Imports 1,204 1,229 1,165 923 633 390 –20

Trade balance –1,202 –1,227 –1,160 –916 –628 –387 (

a

)

Source: USDA, FAS, PSD Online (accessed February 6, 2012). 

 aNot applicable. 

Russian imports have declined each year since 2007 and, as a result of market access 

restrictions, they were 68 percent lower in 2011 than in 2006. Russia went from being the 

world’s largest importer in 2006 to being the fifth largest in 2011.128 During the period 

2006–10, Russia imported the majority of its poultry from the United States (table 8.9).129 

TABLE 8.9 Russia: Broiler meat imports, by supplier, 2006–10 

2006 2007 2008 2009 2010 

Average annual

change 2006–10

 Million $ Percent

United States 512 607 811 715 331 –10

Brazil 202 246 267 123 242 5

EU-27 117 133 177 180 233 19

All other 4 8 12 10 17 44

 Total 836 993 1,267 1,027 822 0

Source: GTIS, Global Trade Atlas database (accessed November 3, 2011). 

Note: Totals may not add due to rounding. 

However, because of trade disruptions (discussed in more detail below), the U.S. share of 

imports fell sharply to 40 percent in 2010, its lowest level of the period. Most other 

imports in the period were supplied by Brazil and the EU-27. The largest category of total 

broiler imports was uncooked frozen chicken halves and quarters (HS 0207.14.20).130 

Government Policies Affecting Trade 

Traditionally, Russia has been an attractive market for global poultry suppliers because 

its domestic production does not meet consumer demand. Rising incomes have led to 

greater overall demand for food, but persistent food price inflation has driven consumers 

 128 USDA, FAS, PSD Online (accessed February 6, 2012). 129 Data on Russia’s country-specific imports in 2011 were not available from GTIS in time for the 

publication of this report. Export data are available for Brazil and the United States. These data show that 

between 2010 and 2011, Brazilian poultry exports to Russia declined 51 percent by value, and U.S. poultry 

exports fell 21 percent. GTIS, Global Trade Atlas database (February 7 and 14, 2012). 130 GTIS, Global Trade Atlas database (accessed September 9, 2011). During 2007–10, about threequarters of imports were listed under HS 0207.14.20. Before 2007, the majority of poultry entered under a 

more general frozen cuts category, HS 0207.14.70, whose use declined rapidly starting in 2007. GTIS, Global 

Trade Atlas database (accessed September 9, 2011). 
8-23 

towards cheaper meats, especially poultry.131 Russian consumers of poultry largely favor 

dark meat, which makes Russia a prime destination for exporting countries with surplus 

dark meat, such as the United States.132 

However, the Russian government has acted to limit imports in recent years in order to 

promote poultry self-sufficiency. 133 Russian poultry production has been expanding 

because of assistance from government programs (such as credit subsidies) as well as the 

increasing adoption of new equipment and techniques in order to compete with 

imports.134 

The Russian government took direct action to limit imports by lowering its TRQ levels 

for poultry imports after 2008 (figure 8.3). In 2006–09, about three-quarters of the TRQ 

was allocated to the United States and about a fifth to the EU-27, with the remaining 

5 percent allocated to other countries, including Brazil.135 In that period, the TRQ was 

usually filled, except in 2010, when a ban on imported poultry washed with chlorinated 

water kept U.S. poultry from entering Russia for over six months.136

Despite a portion of the U.S. quota being reallocated to “other countries,” the TRQ fill 

rate was only 79 percent in 2010.137 In 2011, Russia announced that its TRQ no longer 

had country-specific allocations, so that U.S. shippers now face increased competition 

from other global suppliers. 

The Russian government also imposed a number of bans on the use of certain poultry in 

other products that effectively restrict access to part of the Russian market for U.S. and 

Brazilian exporters. These bans are ostensibly for health and safety reasons, but Brazilian 

and U.S. poultry industry representatives believe the bans are motivated by Russia’s drive 

to become self-sufficient in poultry.138 In 2010 and 2011, Russia phased in bans on the

 131 USDA, FAS, Russian Federation: Poultry Annual Report, 2008, September 15, 2008, 8; USDA, 

FAS, Russian Federation: Poultry Semi-Annual Report, 2009, May 13, 2009, 3; Clements, “Russia Invests in 

Poultry’s Future,” August 6, 2009. 132 EIU, “Russia Food, Beverages and Tobacco Profile,” January 14, 2008. 133 See, e.g., Clements, “Russia Invests in Poultry’s Future,” August 6, 2009; Wattagnet.com, “Russia 

to Decrease Poultry Imports,” May 21, 2009; USDA, FAS, Russian Federation: Big Moves to SelfSufficiency, April 6, 2010. 134 The domestic industry is supported by government programs, such as the National Priority Project 

in Agriculture, which supplies credit subsidies. A major component of government policy is interest rate 

subsidies, aimed at increasing access to commercial capital to fund expansion and improvements. Between 

2006 and 2009, the Russian government invested $2.6 billion in the poultry industry through its various 

programs. See, e.g., Clements, “Russia Invests in Poultry’s Future,” August 6, 2009; USDA, FAS, Russian 

Federation: Poultry Semi-Annual Report; 2009, March 13, 2009, 3; USDA, FAS, Russian Federation: Big 

Moves to Self-Sufficiency, April 6, 2010, 5. 135 USDA, FAS, Russian Federation: Big Moves to Self-Sufficiency, April 6, 2010, 7. 136 USDA, FAS, Russian Federation: Consumption Falls, March 2, 2011, 5. In mid-2010, an export 

certification was approved for U.S. poultry treated with alternatives to chlorine. Bottemiller, “Russia Agrees 

to Lift Ban,” June 25, 2010; USDA, FAS, Russian Federation: Russia Resumes Imports, September 21, 2010. 137 USDA, FAS, Russian Federation: Consumption Falls, March 2, 2011, 5; USDA, FAS, Russia 

Resumes Imports of U.S. Poultry, September 21, 2010, 7. 138 USDA, FAS, Russian Federation: Big Moves to Self-Sufficiency, April 6, 2010; Johnson and 

Becker, U.S.-Russia Meat and Poultry Trade Issues, April 2, 2010, 1; industry representatives, interview by 

USITC staff, Paraná, Brazil, August 22, 2011; industry representatives, interview by USITC staff, São Paulo, 

Brazil, August 23, 2011. 
8-24 

0

200

400

600

800

1,000

1,200

1,400

2006 2007 2008 2009 2010 2011* 2012*

1,000 mt

Source: USDA, FAS, Russian Federation: Big Moves to Self-Sufficiency, April 6, 2010; USDA, FAS, Russia 

Announces 2011 TRQ Quantities, December 27, 2010; USDA, FAS, Putin Declares 2012 Tariff-Quota Levels, 

July 30, 2011. 

FIGURE 8.3 Russia's poultry TRQ has been falling since 2008

*

Projected.

use of frozen poultry in a number of products, including certain specialty food products 

and baby foods, thus limiting the use of poultry imports, most of which are frozen.139 For 

a discussion of how these and other Russian NTMs on poultry affect trade, see chapter 

11. 

As noted, in 2010 Russia banned imports of poultry treated with a chlorine rinse that is 

used to reduce pathogens. The ban primarily affects poultry from the United States, 

where the practice is standard.140 U.S. broiler exports did not enter Russia for over six 

months in 2010. In mid-2010, an export certification was approved for U.S. poultry 

treated with alternatives to chlorine. 141 Currently U.S. producers who use alternative 

PRTs will be able to export to Russia, but producers who do not or cannot switch to 

alternative PRTs will continue to be excluded from the market. Russia also banned 

poultry imports from some U.S. states because of outbreaks of LPAI.142 

In 2011, a number of Brazilian poultry and other meat plants were delisted (i.e., lost their 

eligibility to export) on the grounds that they do not meet Russian food safety 

requirements.143 It is expected that these plant delistings will limit Brazil’s ability to 

export to Russia at least into 2012. 

 139 USDA, FAS, Russian Federation: Frozen Poultry Use, December 29, 2010. 140 The maximum level of chlorine approved by the Russian government in such washes was set at the 

levels found in U.S. drinking water. Johnson and Becker, U.S.-Russia Meat and Poultry Trade Issues, 

April 2, 2010, 9. 141 Bottemiller, “Russia Agrees to Lift Ban on U.S. Poultry Imports,” June 25, 2010; USDA, FAS 

Russian Federation: Russia Resumes Imports, September 21, 2010. 142 USDA, FSIS, “Export Requirements for Russia,” March 29, 2011. 143 As of August 2011, 126 Brazilian plants were affected. Among other complaints, Russia alleged that 

Brazil’s safety record had been declining, that meat tested in Russian labs was contaminated with a number 

of bacteria (including salmonella and listeria), and that Brazilian poultry had been found to contain antibiotic 

residues. USDA, FAS, Brazil; Poultry Annual 2011, September 2, 2011, 5; Moser, “Russia Slams Brazil 

Meat Safety Standards,” May 2, 2011; Moser, “Russian Trade Embargo on Brazil Extended,” August 2, 

2011. 
8-25 

Competition with the United States 

Both Brazil and the United States have found it difficult to supply the Russian market on 

a regular basis in recent years because of market access issues. By lowering its TRQ 

since 2008, the Russian government has reduced the quantity of imports that can enter 

Russia. As described above, NTMs affect imports from both countries by banning certain 

uses of frozen poultry, delisting Brazilian plants, and banning U.S. poultry rinsed with 

chlorine. Reportedly, these limitations likely will remain in place as Russia pursues its 

policy of self-sufficiency in poultry production. 144 Both Russia’s president, Dmitri 

Medvedev, and its prime minister, Vladimir Putin, have made statements indicating that 

the Russian government is not willing to change its meat production subsidies or TRQs as 

part of Russia’s World Trade Organization (WTO) accession negotiations. 145 Indeed, 

when details of Russia’s WTO accession agreement were released, they showed that the 

TRQ for broiler meat was set at 350,000 mt,146 which is less than half the level of the 

total poultry 2010 TRQ.147 According to some Brazilian industry officials, owing to the 

uncertain nature of the Russian market, Brazil is not looking to invest in the Russian 

market or expend market development resources in the country.148 

Even with the problems of market access, the United States consistently has had a greater 

share of the Russian market than Brazil. This is because Russia is a major importer of the 

types of dark meat cuts that the U.S. industry produces in significant volumes for the 

export market because of higher U.S. market demand for white meat.149 Moreover, U.S. 

chicken halves and quarters are very price competitive: U.S. average unit values (AUVs) 

were about 20 percent below Brazil’s AUVs during 2006–10.150

 144 USDA, FAS, Russian Federation: Big Moves to Self-Sufficiency, April 6, 2010; Johnson and 

Becker, U.S.-Russia Meat and Poultry Trade Issues, April 2, 2010, 1; industry representatives, interview by 

USITC staff, Paraná, Brazil, August 22, 2011; industry representatives, interview by USITC staff, São Paulo, 

Brazil, August 23, 2011; USDA, FAS, Russian Federation: Consumption Recovers Strong in 2012, 

August 16, 2011, 5. 145 USDA, FAS, Russian Federation: Consumption Recovers Strong in 2012, August 16, 2011, 5. 146 The TRQ for select turkey products is 14,000, bringing Russia’s poultry TRQs to a total of 

365,000 mt. U.S. government official, e-mail to USITC staff, February 14, 2012. 147 Of the total chicken TRQs, one category of 250,000 tons is for chicken leg quarters and halves and 

has no country-specific allocations; 100,000 tons are reserved for mechanically deboned chicken, 80 percent 

of which is allocated to the EU-27. Industry representative, e-mail to USITC staff, January 9, 2012; U.S. 

government official, e-mail to USITC staff, February 14, 2012. 148 Industry representatives, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 149 Shane, “Has the ‘Brazilian Giant’ Stumbled?” January 2007, 21; GTIS, Global Trade Atlas database 

(accessed September 26, 2011). 150 Based on Russian import data. GTIS, Global Trade Atlas database (accessed September 26, 2011). 

The United States has competitive export prices for chicken leg quarters (CLQs) in Russia compared with 

Brazil. However, the prices of U.S. CLQs for Russia have recently risen because the lower TRQ cut exports 

to Russia. In 2006, the AUVs of U.S. exports of CLQs to Russia were the lowest among the top five U.S. 

export markets and were below the U.S. average world AUV for CLQs. In 2009 and 2010, by contrast, the 

AUVs of U.S. exports of CLQs to Russia were the highest of any in the top five export markets and were 

higher than the U.S. average world AUV. GTIS, Global Trade Atlas database (accessed December 16, 2011). 
8-26 

Japan 

Market Characteristics 

Japan was the eighth-largest consumer of poultry in the world in 2011; between 2006 and 

2011, total consumption grew 5 percent (table 8.10). 151 In 2011, Japan was the 

14th-largest global producer, but only produced enough poultry to supply about twothirds of domestic demand during 2006–11. Imports filled the supply gap. 

TABLE 8.10 Japan: Broiler meat production, consumption, exports, and imports, 2006–11

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

 1,000 mt Percent

Production 1,258 1,250 1,255 1,282 1,290 1,235 0

Consumption 1,970 1,945 1,926 1,978 2,075 2,060 1

Exports 2 6 7 9 11 5 20

Imports 716 696 737 645 789 840 3

Trade balance –714 –690 –730 –636 –778 –835 (a

)

Source: USDA, FAS, PSD Online (accessed February 6, 2012). 

a

Not applicable. 

Japan was the largest chicken importer in the world in 2011 and accounted for 10 percent 

of global imports annually in 2006–11.152 The Japanese food service sector was a major 

consumer of imported poultry.153 On average during 2006–11, Japan imported 38 percent 

of its chicken meat from Brazil, 30 percent from Thailand, 28 percent from China, and 

2 percent from the United States (table 8.11). However, in 2011, Japan’s imports of 

frozen chicken cuts (HS 0207.14) from the United States reached their highest level (by 

volume) since 2003.154 This was largely because of an overall increase in imports from 

many countries to compensate for the 2011 decline in Japanese production caused by a 

major outbreak of high-pathogen AI (HPAI) and the natural disasters that struck Japan 

that year.155 Japan imported frozen chicken cuts, such as boneless leg meat, primarily 

from Brazil, and cooked chicken products, such as skewered grilled chicken, mostly from 

China and Thailand.156 

 151 Japan averaged about 3 percent of world consumption, by volume. USDA, FAS, PSD Online 

(accessed February 7, 2012). 152 USDA, FAS, PSD Online (accessed February 6, 2012). 153 USDA, FAS, Japan: Broiler Annual; 2008, October 1, 2008, 3; USDA, FAS, Japan: Poultry 

Annual 2009, September 8, 2009, 3. Domestically produced poultry dominates the retail markets. 154 Highest volumes both in absolute terms and the share of Japan’s total broiler meat imports. GTIS, 

Global Trade Atlas database (accessed February 7, 2012). 155 USDA, FAS, Japan; Poultry and Products Annual, September 26, 2011. 156 USDA, FAS, Japan: Broiler Annual; 2008, October 1, 2008, 3–4; USDA, FAS, Japan: Broiler 

Annual 2007, November 2, 2007, 4; USDA, FAS, Japan Broiler Market Outlook, July 2, 2010, 3. 
8-27 

TABLE 8.11 Japan: Broiler meat imports, by supplier, 2006–11 

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

 Million $ Percent

Brazil 630 634 1,239 774 1,008 1,480 19

Thailand 493 485 788 807 860 1,047 16

China 639 679 526 564 716 981 9

United States 36 40 50 33 67 121 27

All other 16 18 28 28 31 59 29

 Total 1,815 1,855 2,632 2,206 2,683 3,688 15

Source: GTIS, Global Trade Atlas database (accessed February 6, 2012). 

Note: Totals may not add due to rounding. 

Government Policies Affecting Trade 

Japan imposes a tariff of 0 to 20 percent on uncooked chicken meat (HS 0207) depending 

on the country and product.157 The two most heavily imported uncooked items are frozen 

leg with bone in (HS 0207.14.21), which has a most-favored nation (MFN) tariff of 

8.5 percent, and frozen cuts or offal (HS 0207.14.22), which has a MFN tariff of 

11.9 percent. In addition to tariffs, Japan imposes a 5 percent consumption tax on poultry 

imports, calculated on the basis of the duty-paid value.158 

Japan bans imports from markets with outbreaks of AI. Poultry from some U.S. states 

have been banned because of outbreaks of LPAI.159 The length of these bans have ranged 

from a few months to about a year. Poultry products from at least 18 U.S. states have 

faced temporary bans since 2007, including Missouri since February 28, 2011, North 

Carolina since February 9, 2011, and Pennsylvania between November 15, 2009, and 

May 17, 2010. For a discussion of how these AI-related NTMs affect trade, see 

chapter 11. Japan also restricts imports of uncooked poultry from Thailand and China 

owing to HPAI outbreaks in those countries.160 

Competition with the United States 

Brazil and the United States directly compete in the Japanese market for frozen cuts 

(HS 0207.14), which made up just over half of Japanese broiler meat imports during 

2006–11.161 During 2006–11, Brazil supplied 91 percent of Japan’s imports of frozen cuts 

 157 JMF, Japan’s Tariff Schedule as of April 1, 1010 (accessed August 17, 2011). For all poultry 

products, the zero percent tariffs are only available for imports from the least-developed countries in the 

world or from one of 10 specified countries or groups. Other countries, such as Thailand, also have countryspecific tariffs for some items. 158 USAPEEC, Japan: Tariffs and Quantitative Restrictions for Poultry (accessed September 15, 2009). 159 USDA, FSIS, “Poultry Export Requirements for Japan,” July 12, 2011 (accessed August 17, 2011). 

Japan also has certification requirements for U.S. poultry that is shipped through U.S. states banned from 

exporting to Japan because of AI outbreaks. In September 2011, the requirements for this certification were 

changed to make shipping through banned states easier. USDA, FAS, Japan: Poultry and Products Annual, 

September 26, 2011, 4. 160 USDA, FAS, Japan; Poultry Annual 2004, September 13, 2004; USDA, FAS, Japan Broiler Market 

Outlook, July 2, 2010, 5. 161 By volume. GTIS, Global Trade Atlas database (accessed February 7, 2012). In that six-year period, 

just under half of broiler meat exports were cooked broiler meat, which was almost exclusively supplied by 

China and Thailand and will not be discussed here. 
8-28 

of broiler meat (HS 0207.14), by volume, and the United States supplied 7 percent.162

Reportedly, the Japanese have expressed an interest in diversifying their sources of 

broiler meat imports.163 If Japanese importers act on this, the move could benefit sales of 

U.S. broilers, which are viewed positively by Japanese customers, especially in 

comparison to other suppliers like China.164 However, the ability to meet Japan’s specific 

product requirements is currently an obstacle for U.S. producers and an advantage for 

Brazil’s producers. Japanese customers prefer hand-cut products, especially boneless leg 

meat, and Brazil’s more extensive use of labor for hand cutting and packaging products 

allows it to meet these exacting requirements. 165 The Japanese are willing to pay a 

premium to obtain these cuts.166

A number of U.S. companies are attempting to develop premium dark meat products for 

Japan that could compete with Brazil’s hand-cut products, with varying degrees of 

success.167 Some U.S. companies attempted to do so using leg deboning equipment, but 

these attempts failed to meet Japanese requirements. At least one U.S. company has 

successfully modified its production to make a specialized cut meeting Japanese size and 

packing specifications. 168 However, there has not been a widespread move in the U.S. 

industry to meet Japanese specifications, possibly restricting further growth in U.S. 

poultry exports to Japan.169 Nonetheless, U.S. government officials predict that Japanese 

imports from the United States will maintain their 2011 levels in 2012 because of their 

competitive prices.170 

Compared with China and Russia, Japan has relatively few NTMs. However, Brazil’s AIfree status has given it a distinct advantage over the United States. In 2000, Brazil 

supplied 20 percent of Japan’s imports of frozen chicken cuts; the United States, 

16 percent.171 U.S. market share was eroded in the first half of the decade because of 

bans, beginning in 2002, resulting from outbreaks of LPAI in the United States.172 In 

2002, the first AI ban reduced U.S. market share to 10 percent; by 2004, it had fallen to 

8 percent. However, Brazil’s market share grew to 84 percent by 2004, and during 2006–

11 it averaged 91 percent of Japan’s imports of frozen chicken cuts. While Japan now 

 162 By volume. GTIS, Global Trade Atlas database (accessed February 7, 2012). 163 Industry representatives, presentation attended by USITC staff, Washington, DC, December 7, 

2011. 164 Ibid. 165 USDA, FAS, Japan: Broiler Annual 2007, November 2, 2007, 4; USDA, FAS, Japan: Broiler 

Market Outlook, July 2, 2010, 3; industry representatives, interview by USITC staff, Paraná, Brazil, 

August 30, 2011. 166 Industry representatives, interview by USITC staff, São Paulo, Brazil, August 25, 2011; Knight, 

“Brazil Turning to Buoyant Domestic Market,” April 1, 2011; industry representatives, interview by USITC 

staff, Washington, DC, June 22, 2011; USDA, FAS, Japan: Broiler Market Outlook, July 2, 2010, 3; industry 

representatives, interview by USITC staff, Paraná, Brazil, August 30, 2011. 167 Industry representatives, telephone interview by USITC staff, June 15, 2011; industry 

representatives, interview by USITC staff, Washington, DC, June 22, 2011. 168 Ibid. 169 As noted above, U.S. broiler plants are not conducive to producing specialized products and, 

because U.S. labor costs are high, hand cutting is expensive (compared to Brazil), likely discouraging a 

widespread move to adapt production methods in order to meet Japanese standards. 170 These government officials also predict that Japanese imports from Brazil may decline because 

Brazilian poultry prices are higher than those of its competitors, such as the United States. USDA, FAS, 

Japan; Poultry and Products Annual, September 26, 2011. 171 GTIS, Global Trade Atlas database (accessed September 26, 2011). 172 USDA, FAS, Japan: Poultry and Products, March 7, 2002, 4; USDA, FAS, Japan: Poultry Annual 

2004, September 13, 2004. 
8-29 

enacts state-specific bans for LPAI outbreaks instead of countrywide ones, the United 

States has not regained market share; it averaged 7 percent of imports of frozen chicken 

cuts during 2006–11. Brazil has enough supplies to satisfy the Japanese export market 

and has been able to maintain its market share. 

Saudi Arabia 

Market Characteristics 

Saudi Arabia was the 13th-largest global poultry consumer in 2011, consuming about 

twice as much chicken as it produced in 2006–11 (table 8.12). As a result, it relied 

heavily on imports to supply demand, as consumption continued to increase and 

production levels remained stable. 173 Broiler meat consumption grew because of its 

competitive price (compared to other meats), a growing preference for chicken by 

health-conscious consumers, and increased official and business travel to Saudi Arabia, 

which raised food demand. Middle Eastern consumers prefer smaller birds that can be 

eaten in one sitting.174

TABLE 8.12 Saudi Arabia: Broiler meat production, consumption, exports, and imports, 2006–11 

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

 1,000 mt Percent

Production 548 559 564 570 575 590 1

Consumption 961 1,019 1,064 1,165 1,246 1,410 8

Exports 10 10 10 10 10 10 0

Imports 423 470 510 605 681 830 14

Trade balance –413 –460 –500 –595 –671 –820 (

a

)

Source: USDA, FAS, PSD Online (accessed February 6, 2012). 

 aNot applicable. 

In 2011, Saudi Arabia was the world’s second-largest importer of broiler meat. Between 

2006 and 2011, Saudi Arabia accounted for about 8 percent of global imports.175 Imports 

of broilers rose by 96 percent during 2006–11, while Saudi domestic production 

increased by only 8 percent. Growing consumption makes Saudi Arabia an attractive 

market for global poultry suppliers, and imported poultry is attractive to Saudi consumers 

because it is usually less expensive than domestic poultry.176

 

 173 USDA, FAS, PSD Online (accessed February 6, 2012). 174 Industry representative, meeting with USITC staff, Washington, DC, June 22, 2011. 175 USDA, FAS, PSD Online (accessed July 14, 2011 and December 19, 2011). 176 USDA, FAS, Saudi Arabia: Poultry and Products; Annual, September 12, 2006, 5; ThePoultrySite, 

“Brazilian Produce: Saudis Want It All,” February 29, 2008. 
8-30 

Brazil supplied almost 80 percent of Saudi Arabia’s imports on average during 2006–10; 

the EU-27 was second with 17 percent (table 8.13).177 U.S. poultry made up less than 

one-half of 1 percent of Saudi broiler imports over the last five years.178 In 2010, imports 

from the United States were almost evenly divided between prepared chicken 

(HS 1602.32) and chicken cuts (HS 0207.14), although about 4 percent of US imports 

were whole birds (HS 0207.12).179 Saudi Arabia’s largest import category by value was 

whole frozen chickens (HS 0207.12), primarily from Brazil, which supplied 79 percent of 

this type of chicken during 2006–10.180

TABLE 8.13 Saudi Arabia: Broiler meat imports, by supplier, 2006–10 

2006 2007 2008 2009 2010 

 Average annual

change 2006–10

 Million $ Percent

Brazil 443 531 761 837 1,013 23

EU-27 94 122 196 165 202 21

United Arab Emirates 9 9 0 0 15 14

Argentina 5 11 17 14 10 19

United States 2 1 0 0 5 26

All other 3 7 1 2 11 38

 Total 554 681 975 1,018 1,256 23

Source: GTIS, Global Trade Atlas database (accessed November 3, 2011). 

Note: Totals may not add due to rounding. 

Government Policies Affecting Trade 

Saudi Arabia now assesses import duties of 5 percent on poultry, having reduced duty 

levels in March 2008.181 Previously, poultry tariffs were the higher of 20 percent or 

0.267 cents per kilogram.182 No additional import taxes are levied. 

Saudi Arabia requires certain certifications and maintains some bans that affect which 

countries can supply poultry. Most important is the requirement that all poultry entering 

Saudi Arabia be certified as meeting halal standards. 183 Additionally, Saudi Arabia 

requires certification that poultry imports are from chicken that have not been fed animal 

ruminate, and another certification that the poultry are free from hormones.184 These 

certifications require modifications to production processes which Brazil has made on a 

 177 Percentage are based on value. GTIS, Global Trade Atlas database (accessed November 3, 2011). 

Almost all (99 percent) of EU-27 imports came from France. Data on Saudi Arabia’s country-specific 

imports for 2011 were not available from GTIS in time for the publication of this report. Available export 

data show that between 2010 and 2011, Brazilian poultry exports to Saudi Arabia increased 32 percent by 

value and U.S. poultry exports rose 65 percent. GTIS, Global Trade Atlas database (February 7 and 14, 

2012). 178 GTIS, Global Trade Atlas database (accessed September 23, 2011). 179 Percentages are based on value. GTIS, Global Trade Atlas database (accessed November 7, 2011). 180 By value, HS 0207.12 accounted for 89 percent of Saudi imports on average during 2006–10. GTIS, 

Global Trade Atlas database (accessed December 19, 2011). 181 USTR, 2009 National Trade Estimate Report, March 2009, 431; Allen F. Johnson & Associates, 

“Saudi Arabia: Poultry Import Requirements and Market Information,” November 2, 2010, 6; WTO, WTO 

Tariff Download Facility (accessed November 14, 2011); USAPEEC, “Saudi Arabia: Tariffs and Quantitative 

Restrictions for Poultry” (accessed September 15, 2009). 182 USDA, FAS, Saudi Arabia: Poultry and Products; Annual, September 12, 2006, 5. 183 Saudi Arabia is an Islamic country, and eating halal food is a religious requirement. 184 USDA, FAS, Saudi Arabia: Poultry and Products; Annual, September 12, 2006, 5–6. 
8-31 

large scale, while the United States has not.185 In addition, Saudi Arabia requires that in 

the area of production there can have been no outbreaks of HPAI or a lethal strain of 

exotic Newcastle disease.186 Brazil has had outbreaks of exotic Newcastle disease in the 

past, most recently in 2006, so it could lose access to the Saudi market if an outbreak of a 

lethal strain occurs.187 

Competition with the United States 

An exporter’s ability to enter the Saudi market is dependent on its ability and willingness 

to make a halal product. Saudi Arabia does not have any major SPS barriers or TRQs 

restricting market access for Brazil or the United States. But while Brazil has widespread 

halal production meeting Saudi Arabia’s import requirements, the United States generally 

has much lower levels of halal poultry production, estimated at around 5 percent of total 

production.188 As a result, Brazil is the largest source of Saudi Arabian broiler imports 

(see the “Product Differentiation” section above for more detail). 

Although Saudi Arabia approved U.S automatic slaughter methods in 1999,189 most U.S. 

poultry producers do not meet other Saudi Arabian requirements. For example, they do 

not meet Muslim religious requirements involving an invocation prior to slaughter that 

would allow poultry to be certified halal.190 They also do not meet a Saudi Arabian 

requirement for company certification that all broilers have been fed a vegetarian diet at 

the grow-out stage. Since it is expensive to replace animal proteins in feed with other 

proteins such as soy, few U.S. integrators are willing make the needed changes and are 

therefore unable to certify that their animal feed is free from animal protein.191

According to U.S. industry representatives, only one major U.S. producer currently meets 

Saudi feed requirements and exports to Saudi Arabia.192 However, in December 2011, a 

U.S. organic poultry producer, Guttenberg Farms, signed a contract to export $40 million 

worth of whole frozen chickens to Othaim Markets, a Saudi Arabian grocery store 

chain.193 This contract is worth more than all Saudi imports of U.S. poultry during 2006–

10 and will likely make the United States the third-largest supplier of poultry to Saudi 

Arabia.194 Nonetheless, unless more conventional U.S. integrators are willing to change 

 185 Two additional certifications are required for U.S. poultry: (1) U.S. Food Safety Inspection Service 

export certification and (2) a producer “self-certification to cover any additional requirements not related to 

foods or animal health issues.” USTR, 2009 National Trade Estimate Report, March 2009, 433. 186 USDA, FAS, Saudi Arabia: Poultry and Products; Annual, September 12, 2006, 4; Allen F. 

Johnson & Associates, “Saudi Arabia: Poultry Import Requirements and Market Information,” November 2, 

2010, 3. 187 USDA, ERS, “Brazil’s Booming Agriculture Faces Obstacles,” November 2006. 188 BRChicken, “Brazil’s Rigorous Production of Halal Chicken,” February, 2010; World Perspectives, 

Developing a Competitive U.S. Halal Food Industry Export Sector, August 2005; industry representative, email to USITC staff, November 15, 2011. 189 Abdullah Alathel (commercial attaché and head of Saudi Arabian Committee for Meat Export 

Council), letter to Mostafa Eldakdoky (USDA, FAS), April 29, 1999. 190 Government official, interview by USITC staff, Washington, DC, November 3, 2011. 191 Industry representative, e-mail to USITC staff, November 28, 2011; industry representative, e-mail 

to USITC staff, November 29, 2011. 192 U.S. industry representative, e-mail to USITC staff, November 28, 2011. 193 Williams, “$40 Million Poultry Deal Announced at Saudi Conference,” December 12, 2011. The 

time frame in which these exports would be made was not specified. 194 As stated above, U.S. broiler exports rose between 2010 and 2011 (65 percent by value and 30 

percent by volume). GTIS, Global Trade Atlas database (accessed February 13–14, 2012). 
8-32 

their feed composition, U.S. market share in Saudi Arabia is likely to remain small, 

despite having a product industry representatives believe could be popular and pricecompetitive, especially in the hotel and restaurant industries. 
8-33 

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February 3, 2011. 
8-37 

———. Brazil: Poultry and Products, Poultry Annual, Poultry Annual 2011, by João F. Silva. GAIN 

Report no. BR0714, September 2, 2011. 

———. China, Peoples Republic of: Poultry and Products; Annual Report 2009, by Michael Woolsey 

and Jianping Zhang. GAIN Report no. 9070, September 16, 2009. 

———. China, Peoples Republic of: Poultry and Products; Annual Report, 2010, by Michael Woolsey 

and Jianping Zhang. GAIN Report no.CH10056, September 30, 2010. 

———. China, Peoples Republic of; Poultry and Products; Challenges to Increasing U.S. Sales of 

Chicken Paws to China 2006, by Casey Bean and Suzanne Ryan. GAIN Report no. CH6117, 

December 15, 2006. 

———. China, Peoples Republic of: Poultry and Products; Annual, 2008, by Jianping Zhang and 

Chanda Beckman. GAIN Report no. CH 8073, September 1, 2008. 

———. China, Peoples Republic of; Poultry and Products; Chicken Paw, Wing and Wing Tip Exports to 

China, by Casey Bean, Joseph Jacobson, and Suzanne Ryan. GAIN Report no. CH7006, 

February 7, 2007. 

———. Consumption Falls As Production Unlikely to Compensate for Reduced TRQ in 2011, by Morgan 

Haas and Mikhail Maksimenko. GAIN Report no.RS1108, March 2, 2011. 

———. EU-27: Sanitary/Phytosanitary/Food Safety: Update on the EU-27 Pathogen Reduction 

Treatment Approval Process: 2008, by Yvan Polet. GAIN Report no. E48081, July 18, 2008. 

———. Hong Kong: HKG to Issue Origin Certification for Non-U.S. Poultry, by Caroline Yuen and 

Juliana Madrid. GAIN Report no. HK1132, August 17, 2011. 

———. Indonesia; Approved U.S. Halal Certifying Bodies for Poultry Slaughtering, by John Slete and 

Titi Rahayu. GAIN Report no. ID1103, March 22, 2011. 

———. Japan: Poultry and Products; 2011 Japan Market Situation Update and 2012 Outlook, by 

Kakuyu Obara. GAIN Report no. JA1040, September 26, 2011. 

———. Japan Broiler Market Outlook, by Kakuyu Obara. GAIN Report no. JA0011, July 2, 2010. 

———. Japan: Poultry and Products; Broiler Annual 2008, by Kakuyu Obara. GAIN Report no. 

JA8061, October 1, 2008. 

———. Japan: Poultry and Products; Poultry Annual 2004, by Kakuyu Obara. GAIN Report no. 

JA4069, September 13, 2004. 

———. Japan: Poultry and Products; Poultry Annual 2007, by Kakuyu Obara. GAIN Report no. 

JA7063, November 2, 2007.

———. Japan: Poultry and Products; Semi-Annual 2002, by Kakuyu Obara. GAIN Report no. JA2009, 

March 7, 2002. 

———. Malaysia; Poultry and Products Annual 2005, by Jacelyn Chang. GAIN Report no. MY5036, 

September 2, 2005. 
8-38 

———. Oilseeds: World Markets and Trade, October 2011. 

———. Putin Declares 2012 Tariff-Quota Levels, by Morgan Haas and Mikhail Maksimenko. GAIN 

Report no. RS1137, July 30, 2011. 

———. Russia Announces 2011 TRQ Quantities, by Mikhail Maksimenko. GAIN Report no. RS1078, 

December 27, 2010. 

———. Russian Federation: Frozen Poultry Use Restrictions Amended, GAIN Report no. RS1080, 

December 29, 2010. 

———. Russian Federation: Poultry and Products; Poultry Annual Report; 2008, by Erik Hansen and 

Mikhail Maksimenko. GAIN Report no. RS8071, September 15, 2008. 

———. Russian Federation: Poultry and Product; Poultry Semi- Annual Report, 2009, by Erik Hansen 

and Mikhail Maksimenko. GAIN Report no. RS9016, May 13, 2009. 

———. Russian Federation: Poultry and Products Annual; Consumption Recovers Strong in 2012, by 

Erik Hansen and Mikhail Maksimenko. GAIN Report no. RS1139, August 16, 2011. 

———. Russian ederation: Poultry and Products Annual; Self-Sufficiency Goals Push Subsidies and 

Inflation Higher, by Erik Hansen and Mikhail Maksimenko. GAIN Report no. RS9054, 

September 1, 2009. 

———. Russian Federation: Poultry and Products; Chlorine Ban Postponed until January 1, 2010, 2008 

by Mikhail Maksimenko. GAIN Report no. RS8099, December 29, 2008. 

———. Russian Federation: Poultry and Products; Poultry Semi-Annual Report; 2006, by Erik Hansen 

and Mikhail Maksimenko. GAIN Report no. RS6005, February 13, 2006. 

———. Russian Federation: Poultry and Product Semi- Annual; Big Moves to Self-Sufficiency, by 

Morgan Haas and Mikhail Maksimenko. GAIN Report no. RS1020, April 6, 2010. 

———. Russian Federation: Poultry and Products Semi- Annual; Consumption Falls as Production 

Unlikely to Compensate for Reduced TRQ in 2011, by Morgan Haas and Mikhail Maksimenko. 

GAIN Report no. RS1180, March 2, 2011. 

———. Russian Federation: Poultry and Product; Poultry Semi- Annual Report, 2009, by Erik Hansen 

and Mikhail Maksimenko. GAIN Report no. RS9016, May 13, 2009. 

———. Russian Federation: Russia Resumes Imports of U.S. Poultry, by Morgan Haas and Mikhail 

Maksimenko. GAIN Report no. RS 1052, September 21, 2010. 

———. Saudi Arabia: Exporter Guide, by Hussein Mousa. GAIN Report no. SA 1017, November 9, 

2010. 

———. Saudi Arabia: Grain and Feed; Saudi Arabia Reduces Import Subsidies on Animal feed; 2009, 

by Hussein Mousa. GAIN Report no. SA90001, January 25, 2009. 
8-39 

———. Saudi Arabia: Poultry and Products; Annual 2006, by Hussein Mousa. GAIN Report no. 

SA6012, September 12, 2006. 

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Requirements for the People’s Republic of China,” December 23, 2010. 

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May 17, 2011). 

———. “Export Requirements for Hong Kong,” July 6, 2011. 

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August 15, 2011). 

———. “Poultry Export Requirements for Japan,” July 12, 2011. 

http://www.fsis.usda.gov/Regulations/japan_Requirements/index.asp#Poultry (accessed 

August 17, 2011). 

———. “Export Requirements for Russia” (updated March 29, 2011).

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May 18, 2011). 

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Slaughter: 2010 Summary, February 2011.

http://usda.mannlib.cornell.edu/usda/current/PoulSlauSu/PoulSlauSu-02-25-

2011_new_format.pdf. 

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(accessed various dates). http://www.fas.usda.gov/psdonline/. 

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Outlook Board. USDA Agricultural Projections to 2020, February 2011. 

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Effects on U.S. Exports. Washington, DC: USITC, March 2011. 

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Department of Commerce (USDOC). http://dataweb.usitc.gov/ (accessed various dates). 

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4089.Washington, DC: USITC, July 2009. http://www.usitc.gov/publications/332/pub4089.pdf. 

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Washington, DC: USTR, March 2009. http://www.ustr.gov/about-us/press-office/reports-andpublications/2009/2009-national-trade-estimate-report-foreign-trad. 

———. 2010 National Trade Estimate Report on Foreign Trade Barriers. Washington, DC: USTR, 

March 2010. 

http://www.ustr.gov/sites/default/files/uploads/reports/2010/NTE/NTE_COMPLETE_WITH_AP

PENDnonameack.pdf. 
8-40 

———. “To Protect American Jobs, United States Announces Next Step in Dispute against China.” Press 

release, December 2011. http://www.ustr.gov/about-us/press-office/pressreleases/2011/december/protect-american-jobs-united-states-announces-nex. 

———. “United States Files WTO Case against China to Protect American Jobs.” Press release, 

September 20, 2011. http://www.ustr.gov/about-us/press-office/pressreleases/2011/september/united-states-files-wto-case-against-china-prote. 

———. “United States Requests WTO Panel in Challenge of EU Restrictions on Poultry Exports.” Press 

release. October 8, 2009. http://www.ustr.gov/about-us/press-office/pressreleases/2009/october/united-states-requests-wto-panel-challenge-eu-rest. 

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Diplomat.” Reuters, March 3, 2011. 

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———. “US Asks WTO to Remove China-Imposed Poultry Duties,” December 9, 2011. 

———. “Watt Poultry Top Companies: Brazil,” July 23, 2011 (accessed July 26, 2011). 

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http://tariffdata.wto.org/. 

WTD Trade Alert. “US to Take China to WTO over Poultry Duties,” September 20, 2011. 
9-1 

CHAPTER 9 

Beef 

Overview 

The Brazilian cattle herd is the world’s second-largest, after India’s. Brazil is also the 

world’s second-largest producer of beef, after the United States, and the largest beef 

exporter. Brazil’s extensive pastureland and relatively low labor costs make it a 

competitive producer of grass-fed beef. Major export markets for beef in 2011 were 

Russia, the European Union (EU-27), Iran, Hong Kong, and Egypt (figure 9.1). 

Relative to other major beef producers, such as the United States and the EU-27, Brazil 

exports a greater share of its production, but it also produces less beef for the size of its 

cattle herd. The limited use of feedlots and low investment by ranchers in fertilizers, 

seeds, and lime to improve their pasture reduces productivity. However, the size of 

Brazil’s cattle herd, together with ongoing efforts to improve genetics, pastureland, and 

management practices (described in greater detail below), suggest that Brazil has the 

potential to significantly increase its beef production. 

The presence of diseases, most notably foot-and-mouth disease (FMD), restricts Brazil’s 

opportunities for fresh and frozen beef exports, and limits competition between U.S. and 

Brazilian beef in third-country markets. Fresh/chilled, and frozen beef from Brazil are not 

eligible for import into Japan, Korea, or North America. Other markets such as the EU-27 

have imposed strict sanitary and traceability requirements on imports of beef from Brazil 

that have limited, and sometimes halted, imports from Brazil.1

Most beef produced in Brazil is not closely substitutable with beef produced in the United 

States, lessening the competition between U.S. and Brazilian beef in some export 

markets. Most beef produced in the United States is well-marbled, grain-fed beef from 

steers and heifers. By contrast, most beef from Brazil is from grass-fed animals and is 

more closely substitutable for U.S. beef produced from culled dairy cows and breeding 

animals, which is likely to be less well marbled.2

Differences in the type of beef produced and in the ability to meet sanitary requirements 

limit competition between U.S. and Brazilian beef in third-country markets in the short 

run. However, in the long run, Brazil has the potential to improve its competitive 

position. While few cattle in Brazil are grain-fed now, Brazil is a major producer of 

grains, with the potential to expand. Brazil is also making efforts to improve its disease 

status. The state of Santa Catarina has been recognized by the World Animal Health 

Organization (OIE) as FMD-free without vaccination, and five zones within Brazil have

 1

 USDA, FAS, EU-27: Livestock and Products, February 1, 2008, 2–3; Meat and Livestock Australia, 

“EU Rejects Brazil’s ‘Hilton’ Modification Request,” June 20, 2011. 2

 In 2010, cows and bulls accounted for approximately 21 percent of the cattle slaughtered in the United 

States. USDA, NASS, Livestock Slaughter: 2010 Summary, April 2011, 17. 
FIGURE 9.1 Brazil and the United States largely exported beef to different countries in 2011 

 Source: Compiled by USITC staff using data from GTIS, Global Trade Atlas database (accessed February 13, 2012).

9-2 
9-3 

been recognized as FMD-free with vaccination. Brazil’s Ministry of Agriculture, 

Livestock, and Supply (MAPA) plans to petition the OIE to recognize the entire country 

as FMD-free with vaccination in 2013.3

 Any lifting of sanitary restrictions on Brazil’s 

beef exports would increase global competition between U.S. and Brazilian beef. 

Brazilian Production, Consumption, and Trade 

Brazil’s large domestic market competes with its export markets and gives Brazil’s beef 

producers some protection from shifts in export demand or market access restrictions 

(discussed in greater detail below). The share of Brazilian beef production consumed 

domestically rose from 77 percent to 85 percent during 2006–11, with total domestic 

consumption increasing 11 percent in volume. In 2011, Brazil’s beef exports were 

equivalent to approximately 15 percent of production (table 9.1).4

 Brazil’s cattle herd 

expanded throughout 2006–11, as the calf crop exceeded the number of cattle slaughtered 

every year. The number of cattle in Brazil increased 11 percent between 2006 and 2011, 

while beef production was almost unchanged setting the stage for future increases in beef 

production. 

TABLE 9.1 Beef: Production, consumption, and trade, selected producers and markets, 2011 (1,000 mt) 

Production Consumption Imports Exports Trade balance

Producers 

 United States 12,048 11,750 911 1,241 330

 Brazil 9,030 7,750 45 1,325 1,280

 EU-27 8,050 7,945 370 475 105

 China 5,550 5,532 42 60 18

 India 3,060 1,960 0 1,100 1,100

 All other 14,728 14,073 2,804 3,444 640

 Total 56,848 55,834 6,862 7,870 (a

)

Selected Major Importers 

 Russia 1,405 2,451 1,050 4 –1,046

 Japan 505 1,208 725 0 –725

 Korea 262 670 410 1 –409

 Iran 380 605 225 0 –225

 Mexico 1,830 1,890 280 220 –60

 Subtotal 4,382 6,824 2,690 225 –2,465

Source: USDA, FAS, PSD Online (accessed February 6, 2012). 

Note: Totals may not add due to rounding. 

Production in Brazil 

Over the six years during 2006–11, the global cattle population declined slightly, while 

Brazil’s share of the global cattle herd increased. Of the top six cattle producers, only 

Brazil and India experienced increases in the cattle herd between 2006 and 2011. The 

United States, China, the EU-27, and Argentina all experienced declines. 

 3 Brazilian Meat Monitor, “Mendes Wants Brazil Free from Foot-and-Mouth,” October 14, 2011, 9. 4

 On a carcass-weight basis, according to data from the USDA, FAS, PSD Online. The Instituto 

Brasileiro de Geografia e Estatística (IBGE) estimates that in 2009, 14 percent of beef produced in 2009 was 

exported. IBGE, Municipal Livestock Production, 2009, (2010) 14. 
9-4 

Brazil produces primarily grass-fed beef, although some cattle are fed in feedlots, 

particularly during the winter months. 5 Brazil’s cattle are grazed on approximately 

101 million hectares (ha) (250 million acres) of cultivated pasture land and another 

55 million ha (136 million acres) of unimproved pasture.6

 Beef production in Brazil is 

primarily from the Nelore breed of Bos indicus, or zebu cattle.7

 They are generally more 

heat- and insect-tolerant than Bos taurus cattle derived from European breeds, but 

generally mature later and produce less meat per animal, with less intra-muscular fat. 

Cattle that are grain-fed in Brazilian feedlots are more often cross-breeds with Bos taurus 

cattle.8

 In addition to beef, Brazil’s cattle herd also produces a large volume of hides. See 

box 9.1 for a discussion of hides and leather production and exports. 

Brazil’s beef production is much less intensive than in the United States. Differences in 

productivity are likely due to both genetics and nutrition. With a cattle herd of 

190.9 million, Brazil produced 9.0 million metric tons (mt) of beef in 2011. The United 

States, with a cattle herd of 92.6 million cattle, produced 12 million mt of beef.9 Beef 

production in Brazil is lower both because a smaller share of cattle reach slaughter weight 

each year and because the yield of beef per animal is lower (table 9.2). Brazil’s beef 

packers are reportedly running at low capacity and would be able to increase beef 

production if more fed cattle were available.10

Trade 

Brazil’s beef exports declined in volume during 2006–11, although the value has 

increased because of rising prices.11 In 2011, Brazil’s top export markets for beef were 

Russia, the EU-27, Iran, Hong Kong, and Egypt. In 2006–07, Brazil’s largest export 

market was the EU-27, but the volume of exports to the EU-27 fell, due to sanitary 

restrictions, by more than 50 percent between 2007 and 2008, leaving Russia as Brazil’s 

largest beef export market in terms of both volume and value.12 In 2010, exports to Iran 

also exceeded exports to the EU-27. In fact, exports to Iran nearly doubled in volume 

during 2009–10 and more than doubled in value.13 

 5

 In 2010, 1.99 million cattle were finished in feedlots in Brazil; Brazilian Meat Monitor, “Feedlots Are 

an Option,” June 3, 2011, 9. This was equivalent to approximately 6 percent of the total number of cattle 

slaughtered. 6

 Veloso and Teixeira, “Economic Aspects of the Agricultural Production in Brazil,” Embrapa, 2010, 

11. 7

 In contrast, most cattle in the United States and in Europe are Bos taurus cattle. One breed of Bos 

indicus cattle that is common in the United States is the Brahman. Bos indicus cattle are characterized by a 

hump on the shoulder and neck. 8

 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 26, 2011. 9

 USDA, FAS, PSD Online. 

10 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 31, 2011. 11 See chapter 5 for a discussion on the role of Brazilian agribusiness in global agricultural exports. 12 The decline in exports to the EU-27 was due to sanitary restrictions. Developments in individual 

markets are discussed below. 13 There is no competition between U.S. and Brazilian beef producers for the Iranian beef market 

because U.S. firms and citizens are prohibited from exporting any goods or services to Iran. U.S. Department 

of the Treasury, Office of Foreign Assets Control, “What You Need to Know About U.S. Economic 

Sanctions,” 18. Even if U.S. producers were granted access in the future, it is unlikely that U.S. exporters 

would gain significant market share in the short run because Iran requires imports to be certified as halal 

under Islamic law, and the United States is not a significant producer of halal certified beef. 
9-5 

BOX 9.1 Hides and Leather Production and Exports 

Hide value can represent a significant percentage of the value of cattle slaughtered in both Brazil and the United 

States. In 2011, Brazil’s leather exports were valued at $2.0 billion—more than one-third the value of its beef exports. 

U.S. exports of bovine hides and skins in 2011 were valued at over $3.0 billion, more than half the value of its beef 

exports. In the United States, the average price for a branded steer hide from major beef packers in 2010 was 

$70.91—almost 6 percent of the value of the average steer.a

 Raw hides and skins can be either exported or tanned 

to produce leather, which may be further processed before being used to produce products such as shoe uppers, 

apparel, and luggage. 

There are important differences between Brazil and the United States in this domain. Many of Brazil’s cattle hides are 

unfit for leather production. In 2010, approximately 40 percent of cattle hides in Brazil were not used to make leather 

because of damage from external parasites or barbed wire fencing.b

 In contrast, almost all cattle hides in the United 

States are either used to produce leather in this country or are exported for the production of leather products.c

 

In addition, Brazil tends to export different types of hides than the United States does. Brazil exports relatively few 

raw hides and skins (HS 4101), instead exporting mostly tanned or crust hides (HS 4104), and further prepared hides 

(HS 4107).d

 In comparison, U.S. exports are primarily of raw hides and skins, as shown in the tabulation below. This 

difference in export patterns may be due to the long-term trend in leather manufacturing industries of moving to 

developing countries because of lower labor costs as well as weaker environmental regulations.e 

Hides and leather exports from Brazil and the United States, 2011 (million $) 

Country Raw Tanned

Further 

prepared Total 

Brazil 1.0 867.1 1,151.1 2,019.1 

United States 2,153.0 787.1 118.4 3,058.5 

Source: Global Trade Atlas database, exports under Harmonized System (HS) 

4101, HS 4104, and HS 4107. 

China is the largest export market for raw hides and skins from both Brazil and the United States, and China and Italy 

are major export markets for tanned leather from both countries. Brazil’s major export markets for further prepared 

leather are the United States and Italy, while major U.S. export markets for further prepared leather include Japan, 

Mexico, and Hong Kong. 

_____________ a

 USDA, Livestock and Grain Market News Service, 2010 Annual Meat Trade Review, 16, 74. Prices were 

substantially lower in 2009, when the average branded steer hide price was $44.10. Full-year 2011 data are not yet 

available. b

 Brazilian Meat Monitor, “Leather Export Revenue,” October 14, 2011, 1–2. c

 In 2010, approximately 45.4 percent of U.S. cattle hides were exported as raw hides and 54.6 percent were 

tanned. Leather Industries of America, U.S. Leather Industry Statistics 2011 Edition, 3. USDA reports a larger share 

exported as hides. See USDA, FAS, “Export Sales, Weekly Historical Data.” d

 HS headings 4101, 4104, and 4107 include equine as well as bovine hides and skins, but the share of equine 

hides and skins is believed to be small. e

 Food and Agriculture Organization, “Medium-term Prospects for Agricultural Commodities” (accessed 

November 23, 2011), 3. 

 
9-6 

TABLE 9.2 Brazil: Beef production, supply, and distribution, 2006–11 

2006 2007 2008 2009 2010 2011 

Average annual 

change 2006–11

 Percent

January cattle inventory (1,000 head) 172,111 173,830 175,437 179,540 185,159 190,925 2

Cattle production (1,000 head) 48,188 48,845 49,050 49,150 49,200 49,445 1

Cattle slaughter (1,000 head) 31,515 33,110 32,700 33,510 34,290 39,390 5

Beef production (1,000 mt) 9,025 9,303 9,024 8,935 9,115 9,030 0

Beef imports (1,000 mt) 28 30 29 35 35 45 10

Beef exports (1,000 mt) 2,084 2,189 1,801 1,596 1,558 1,325 –9

Domestic consumption (1,000 mt) 6,969 7,144 7,252 7,374 7,592 7,750 2

Per capita consumption (kg) 36.4 36.8 36.9 37.1 37.8 38.1 1

Source: USDA, FAS, PSD Online (accessed February 6, 2012). 

Note: Beef data are in carcass weight and are not directly comparable to data in product weight. 

The majority of Brazil’s beef production is consumed domestically. Domestic 

consumption increased by 11 percent over 2006–11, while the volume of exports has 

declined. 14 In 2011, Brazil’s per capita beef consumption (38.1 kg), was slightly higher 

than that of the United States (37.5 kg).15 Over the past six years, Brazil’s per capita beef 

consumption has risen nearly 1 percent per year. Rising incomes in Brazil, as well as 

population increases, have contributed to increasing domestic consumption.16 Brazil’s 

total domestic beef consumption during 2006–11 increased by 11 percent. As the real has 

appreciated against many foreign currencies, domestic consumption has become 

increasingly price-competitive with exports.17 

Primary Factors Affecting Competitiveness 

Cost of Production 

Brazil’s beef producers have the benefit of extensive pastureland, relatively low-cost 

labor, and a large domestic market that have helped hold down production costs.18 For 

much of the 2006–10 period, Brazil’s cost of production was reportedly significantly 

below that of the United States.19 However, as the real has appreciated relative to the 

dollar, Brazil’s cost advantage has largely disappeared. In any case, as noted earlier, 

Brazil’s grass-fed beef largely competes in a different market segment than most U.S. 

grain-fed beef. 

In 2011, the U.S. cattle herd was particularly hard hit by a widespread drought, declining 

by about one million animals (slightly over 1 percent). Because of the drought, more beef 

 14 In contrast, U.S. domestic beef consumption declined 6 percent 2006–10, and per capita consumption 

fell almost 10 percent. USDA, FAS, Livestock and Poultry: World Markets and Trade, October 2010, 18, 30; 

USDA, FAS, Livestock and Poultry: World Markets and Trade, April 2011, 7–8, 19. 15 USDA, FAS, PSD Online database. 

16 Association of Brazilian Beef Exporters (ABIEC), written submission to the USITC, 

December 2011, 4. 17 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 28, 2011. 18 Dyke and Nelson, Structure of the Global Markets for Meat, September 2003, 4. 19 Beef Magazine, Ten Years Later, April 1, 2008, 1; Ferraz and Felício, “Production Systems: An 

Example from Brazil,” June 2009, 2. 
9-7 

In 2011, the U.S. cattle herd was particularly hard hit by a widespread drought, declining 

by about one million animals (slightly over 1 percent). Because of the drought, more beef 

cows were sent to slaughter, and cattle were sent to slaughter at an earlier age.20 This 

lowered the price of U.S. beef in the short run, particularly that of the lean beef that 

competes more closely with the majority of U.S. imports. This greater availability of 

domestic lean beef in the U.S. market lowered U.S. imports and placed downward 

pressure on global prices. However, in the long run, the decline in the U.S. cattle herd is 

expected to make U.S. beef more expensive, particularly as cattle ranchers withhold 

heifers from slaughter in order to expand the herd. Once herd rebuilding begins in the 

United States, the lower availability of domestic lean beef, primarily used in processed 

products such as hamburger meat, is expected to bolster U.S. imports and raise prices for 

lean beef on the global market. 

The cost of beef production in Brazil in 2010 was very close to the average price paid for 

steers and heifers by U.S. slaughterhouses. The cost of producing beef in Brazil, for a 

typical producer in Mato Grosso in 2010, was R$5.737 per kg, which is equivalent to 

$147.86 per hundredweight.21 The average price for steers and heifers slaughtered in the 

United States in 2010 was respectively $150.67 and $150.61 per hundredweight, dressed, 

or only 2 percent higher than the cost of beef production in Mato Grosso.22

Beef prices in both Brazil and the United States fell in 2009 and increased in 2010. In 

2010, the difference between average dressed steer prices in the United States and Brazil 

narrowed. Average annual carcass prices per hundredweight (cwt) for Mato Grosso, 

Brazil, are compared to annual average U.S. dressed steer prices in the following 

tabulation. 

Year Brazil/cwt ($) U.S./cwt ($) Difference 

2008 129.14 147.37 14% 

2009 110.68 131.99 19% 

2010 141.23 150.61 7% 

Source: IMEA, Boletim Semanal, various dates, USDA Livestock and 

Grain, Annual Meat Trade Review, 2009 and 2010.

Because most cattle in Brazil are grass fed, increases in the prices of corn and soybeans 

have less direct impact on the costs of production for beef than for pork and poultry, and 

feed prices have less impact on the cost of beef production in Brazil than in the United 

 20 Most beef produced in the United States is from steers and heifers. The slaughter of breeding stock 

(cows) can increase the supply of beef in the short run at the expense of future productivity. 21 IMEA, Boletim Semanal, “Cost of Beef Cattle in Production Systems: Full Cycle,” August 26, 2011, 

6. Beef in Brazil is typically priced per arroba (@), a unit that is 15 kg carcass weight; with a 50 percent 

conversion rate, the arroba is equal to 30 kg live weight. Cost data from IMEA do not include opportunity 

costs for the owner’s labor but do include the cost of land. The annual average exchange rate during this 

period was R$1.76 per dollar. In the United States, cattle and beef are often priced per hundredweight. 22 The cost comparison is based on the price of beef rather than the live weight price of cattle because, 

as noted earlier, the average dressing percentage (ratio of dressed carcass weight to live weight) is lower in 

Brazil than in the United States. Cattle prices in both countries may differ from the data presented because 

cattle also produce valuable hides, edible offal, and inedible products in addition to cuts of beef. 
9-8 

States.23 In 2010, purchased feed accounted for 40.4 percent of the total cost of beef 

production in Kansas, and pasture costs accounted for 13.9 percent.24 In Mato Grosso, in 

comparison, the costs of pasture renewal and recovery accounted for 18.0 percent of the 

reported cost of beef production, and other feed (mineral supplements and concentrates) 

accounted for 10.9 percent.25 However, beef production in Brazil competes for acreage 

with crops like corn and soybeans. Increasing prices for these crops may increase rental 

rates or opportunity costs for grazing land, or alternatively, may push cattle grazing onto 

less productive land. 

During 2006–10, Brazilian beef cost less than U.S. beef on a per-pound basis. However, 

with the appreciation of the real, particularly in 2010, the difference in cost has 

narrowed. In beef markets where Brazil more directly competes with the United States, 

such as Russia, Egypt, and Hong Kong, the increase in Brazil’s cost of production has 

made U.S. beef increasingly price-competitive. 

Efficiency 

The typical time it takes to raise an animal to slaughter weight is longer in Brazil than in 

the United States. Cattle raised in Brazil typically reach slaughter weight at 25–36 

months, compared to 18–22 months for the grain-fed cattle typically produced in the 

United States.26 The time to slaughter in Brazil has been declining in recent years, and it 

is possible that Brazil’s ranchers could reduce this time somewhat further and become 

more productive by improving their pasture through greater investments in seeds, 

fertilizer, and lime.27

The number of calves produced annually per cow in Brazil is lower than in the United 

States and other major beef producing regions, such as Australia and the EU-27. In 2011, 

the calf crop in Brazil was equivalent to 55 percent of the number of cows (beef and 

dairy) in the cattle herd, compared to 89 percent in the United States. The reproductive 

rate is a function of both management practice and nutrition. Many cattle producers in 

Brazil do not use artificial insemination, and those that do usually limit the practice to a 

single heat cycle because of the expense.28 Improvements in pasture conditions would 

also be expected to improve the reproductive rate through better nutrition. 

Beef heifers in Brazil also typically reach breeding maturity at a later age than do the 

breeds common in the United States. Gestation length is also slightly longer, further 

 23 According to Brazil’s National Animal Feed Association (Sindirações), Brazil’s consumption of 

cattle feed in 2010 was approximately 7 million metric tons, far less than the 30 million mt consumed as feed 

in poultry production or the 15 million mt consumed in swine production, even though Brazil produced 

nearly three times as much beef as pork in 2010. Brazilian Meat Monitor, Feed Industry Forecasts Growth of 

4.2%, March 25, 2011, 13. 24 USITC staff calculations from Kansas Farm Management Association, “Profit Center Analysis: Beef 

Cows, Sell Calves,” 2010; Kansas Farm Management Association, “Profit Center Analysis: Beef 

Backgrounding/Finishing.” 25 IMEA, Boletim Semanal, “Cost of Beef Cattle in Production Systems: Full Cycle,” August 26, 2011, 

6. 26 Industry representatives, interviews by USITC staff, Mato Grosso, Brazil, August 25–September 1, 

2011; Bragantini, “Agribusiness Innovation in Brazil,” 2008, 24. 27 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 31, 2011. 28 Industry representative, interview by USITC staff, Mato Grosso, Brazil, September 1, 2011. 
9-9 

reducing the reproductive efficiency.29 These are genetic traits that would be difficult to 

improve in the near term. 

Beef production per carcass is lower in Brazil than in the United States both because of 

lower live weights and a lower yield rate, or “dressing percentage.” 30 The average 

dressing percentage in Brazil is approximately 50–53 percent,31 while the average carcass 

weight in 2011 was 229 kilograms (kg) (505 lb).32 At a dressing percentage of 50 percent, 

the average live weight was 459 kg (1,011 lb).33 The average dressing percentage for fed 

steers and heifers slaughtered in the United States in 2010 was 65–66 percent.34 The 

dressing percentage for all federally inspected cattle slaughtered in the United States in 

2010 was 60 percent.35 The main reason for Brazil’s lower dressing percentage is genetic. 

The number of cattle in Brazil that are fed in feedlots has generally increased over time, 

although fewer cattle were fed in Brazil in 2010 than in 2009 or 2008. 36 In 2010, 

1.99 million cattle were finished in Brazilian feedlots, a decline from almost 2.75 million 

in 2008.37 High costs for feed ingredients and high prices for feeder cattle have been 

blamed for the slow growth in feedlot production.38 Corn is the primary source of grain 

used in Brazilian feedlots, followed by sorghum.39 However, much of the ration is made 

up of crop residues such as sugar cane bagasse or citrus pulp.40

Much of the pasture land in Brazil is relatively poor in nutrients, and some cattle 

producers in Brazil do not add fertilizers to forage. As a result, there are many 

underutilized pasture areas.41 However, there are incentives to encourage the recovery of 

degraded pasture land. A new credit line for such efforts has recently been approved 

under the Brazilian government’s Low Carbon Agriculture (ABC) Program. Credit will 

be available for up to 12 years, with a three-year grace period and special low interest 

rates. The Instituto Mato-grossense de Economia Agropecurária [Mato Grosso Institute 

 29 Randel, “Reproduction of Bos indicus Breeds and Crosses,” 2005, 28–29. 30 Filho, “Cross-breeding Strategies for Beef Cattle Production in Brazil,” January 2000, 357. Dressing 

percentage is the ratio of the live weight of the animal to the “dressed” carcass weight. 31 Filho, “Cross-breeding Strategies for Beef Cattle Production in Brazil,” January 2000, 357; 

BeefMagazine.com, “So What about Brazil?” March 1, 2005. The dressing percentage is the ratio of the live 

weight of the animal to the dressed or carcass weight. 32 Given the number of cattle slaughtered in Brazil in 2011 and the amount of beef produced. USDA, 

FAS, PSD Online database (accessed February 6, 2012). 33 This is a substantial increase from 2006, when the average carcass weight was 219 kg and the 

average estimated live weight was 438 kg. 34 USDA, AMS, “5 Area Yearly Weighted Average Direct Slaughter Cattle – Negotiated,” January 4, 

2012. 35 USDA, NASS, Livestock Slaughter: 2010 Summary, April 2011, 9, 15. Calculated as the ratio of 

average dressed weight to average live weight of cattle. 36 Brazilian Meat Monitor, “Feedlots to Resume growth in Brazil this year,” August 26, 2011, 8. Cattle 

may also be fed for a short period of time in the winter months when forage is scarce. The number of cattle 

that receive supplemental feed in the winter exceeds the number that are finished in feedlots. 37 Brazilian Meat Monitor, “Feedlots are an Option for Live Cattle Production in Brazil,” June 3, 2011, 

9. 38 Brazilian Meat Monitor, “High Production Costs Could Undermine Feedlots,” June 3, 2011, 1–2. 39 Millen, et al., “A Snapshot of Management Practices and Nutritional Recommendations Used by 

Feedlot Nutritionists in Brazil,” Journal of Animal Science, 2009 (87), 3427–3439. 40 Industry representative, e-mail to USITC staff, August 17, 2011; Brazilian Meat Monitor, June 3, 

2011, 1. 41 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 26, 2011. Mato 

Grosso has the largest cattle herd in Brazil. 
9-10 

for Agricultural Economics (IMEA)] estimates that about 9 million ha (22 million acres) 

could be recovered under the new policy, equivalent to 34 percent of the total pastureland 

area in the state.42 Restoration of degraded pasture would allow ranchers to produce more 

beef in the region without putting additional acreage into beef production. 

Product Characteristics 

Competition between beef produced in Brazil and the United States is limited because of 

the differences between Brazilian grass-fed beef and U.S. grain-fed beef. Grass-fed beef 

typically has a lower percentage of intra-muscular fat (marbling) than grain-fed beef. 

Marbling is also a function of the breed of cattle, and the breeds of cattle predominately 

raised in Brazil have less marbling than most breeds raised in the United States. 43

Marbling in beef contributes to its tenderness and flavor. For instance, a higher degree of 

marbling is required for USDA prime beef than for choice grade, and a higher percentage 

for choice than for select grade. Beef with more marbling is preferred for many dishes 

prepared using dry heat, such as steaks, and for dishes in which thinly sliced beef is 

cooked quickly, such as Korean-style barbeque and the popular Japanese beef dish 

gyudon. Less well-marbled beef is used in dishes in which beef is cooked slowly using 

moist heat. In addition, much lean beef is used in processed beef products, such as ground 

beef. The United States is the largest import market for lean beef for processing. Japan 

and Korea are among the largest import markets for well-marbled beef. 

Disease 

Competition between U.S. and Brazilian beef exports is further limited by sanitary 

restrictions on Brazil’s exports, most notably due to the presence of FMD in some parts 

of Brazil. Markets such as the United States, Japan, and Korea are closed to fresh/chilled 

and frozen beef from Brazil because of Brazil’s FMD status. Other markets, such as the 

EU-27, allow imports of fresh/chilled and frozen beef from approved producers in Brazil 

that meet strict guidelines including traceability.44 FMD was last reported in Brazil in 

April 2006.45

The OIE does consider some zones within Brazil to be FMD-free: it recognizes the state 

of Santa Catarina as being FMD-free without vaccination, and it recognizes five zones 

within Brazil, encompassing 10 states and the Federal District, plus parts of 5 additional 

states, as being FMD-free with vaccination.46 Some countries allow imports of beef from 

zones that are FMD-free with vaccination. The United States recognizes the state of Santa 

 42 Brazilian Meat Monitor, “New Credit Line for Pastureland,” September 30, 2011, 11; industry 

representative, interview by USITC staff, Mato Grosso, Brazil, August 31, 2011. 43 Industry representative, interview by USITC staff, Washington, DC, August 1, 2011. Beef from Bos 

indicus cattle has generally been reported to be less tender than beef from Bos taurus cattle. Crouse et al, 

“Comparisons of Bos Indicus and Bos Taurus Inheritance,” Journal of Animal Science, 1989, 2666–67. 44 USDA, FAS, EU-27: Livestock and Products Semi-Annual, February 26, 2010, 8. 45 More precisely, FMD was last reported in a domesticated animal in Brazil in April 2006, but the 

prevalence of FMD in the wild population is unknown. World Animal Health Organization (OIE), World 

Animal Health Information Database, accessed December 8, 2011. 46 The states of Acre, Espírito Santo, Goiás, Mato Grosso, Minas Gerais, Paraná, Rio de Janeiro, 

Rondônia, São Paulo, and Sergipe, plus the Distrito Federal and parts of the states of Amazonas, Bahia, Mato 

Grosso do Sul, Pará, and Tocatins, are recognized by the OIE as FMD-free with vaccination. World Animal 

Health Organization, List of FMD-Free members, May 2011. http://www.oie.int/en/animal-health-in-theworld/official-disease-status/fmd/list-of-fmd-free-members/ (accessed September 12, 2011). 
9-11 

Catarina as free of FMD, but considers the preventive measures on animal or meat 

imports into the region from infected regions to be “less restrictive than would be 

acceptable for importation into the United States.” Therefore the United States does not 

allow imports of fresh/chilled and frozen beef from Brazil. U.S. sanitary regulations, like 

those of many other countries, do allow imports of cooked or processed beef from 

Brazil.47

Sanitary measures are a major factor restricting direct competition between the United 

States and Brazil in third-country markets. Brazil’s lack of market access to many major 

import markets, including North America, Japan, and Korea, forces it to depend on a 

limited number of markets, including Russia, the second-largest import market for beef 

after the United States. As long as the barriers in major importing countries such as 

Japan, Korea, and the United States remain in place, direct competition between U.S. and 

Brazilian beef is expected to remain limited to only a few markets, such as Russia and 

Hong Kong. 

Transportation Infrastructure 

Long overland transportation routes and infrastructure deficiencies significantly increase 

Brazil’s total cost to supply beef to export markets. Most major river export routes are in 

the Northeast or the far southern part of the country, while most cattle production is in the 

center of the country. As a result, transportation costs to ports are high.48 According to 

industry sources, beef prices in Mato Grosso are 8–10 percent below export prices 

because of transportation costs.49 The cost of refrigerated transportation from packer to 

port in São Paulo is reportedly R$70 (roughly $40) per mt. According to industry sources, 

this is one-third more than refrigerated transport costs would be in the United States for 

the same distance.50

Competitive Position with the United States 

Competition between U.S. and Brazilian fresh, chilled, and frozen beef in export markets 

is limited by Brazil’s disease status and product characteristics. The recognition of 

disease-free status within a subnational zone, discussed above, has the potential to 

increase the ability of Brazil to compete with U.S. producers in export markets. 51

However, competition with U.S. beef is also limited by the characteristics of Brazil’s 

grass-fed beef and the small size of Brazil’s feedlot sector. Brazil is a low-cost supplier of 

grass-fed beef and a major exporter of prepared and preserved beef. The United States 

supplies primarily well-marbled grain-fed beef. Even if Brazil were to become eligible to 

export beef to North America, Japan and Korea, beef from Brazil is more likely to 

compete with other sources of grass-fed beef than with the majority of U.S. beef.52 

 47 U.S. Code of Federal Regulations, Title 9, § 94.11. 48 See chapter 3 for more information on Brazil’s transportation infrastructure. 49 Industry representative, interview by USITC staff, Mato Grosso Brazil, August 28, 2011. 50 Industry representative, interview by USITC staff, São Paulo Brazil, August 22, 2011. 51 Stewart and Stewart, on behalf of the National Farmers Union and the United States Cattlemen’s 

Association, written submission to the USITC, October 13, 2011, 3. 52 Brazil does not allow imports of U.S. beef because of concerns related to bovine spongiform 

encephalopathy (BSE). 
9-12 

Key Export Markets 

Brazil’s beef exports are limited by its disease status, particularly for FMD. Producers in 

Brazil are not eligible to export fresh/chilled and frozen beef to Canada, Japan, Korea, 

Mexico, or the United States—5 of the top 10 beef-importing countries.53 Brazil’s beef 

exports to the EU-27, formerly its largest export market, have also been restricted by 

traceability problems related to its disease status.54 Brazil’s top beef export markets in 

2011 were Russia, the EU-27, Iran, Hong Kong, and Egypt (table 9.3). The removal of 

nontariff measures (NTMs) that restrict beef trade, including sanitary measures related to 

FMD and restrictions related to hormones and bovine spongiform encephalopathy (BSE, 

also known as mad cow disease), would change export patterns for both Brazilian and 

U.S. beef. See chapter 11 for an analysis of these impacts. 

TABLE 9.3 Brazil: Beef exports to selected markets, 2006–11 

 2006 2007 2008 2009 2010 2011 

Average annual 

change 2006–11

 Million $ Percent

Russia 756 975 1,431 912 1,024 1,015 6

EU-27 1,387 1,330 675 595 641 783 –11

Iran 107 145 323 335 808 689 45

Hong Kong 111 183 368 479 383 535 37

Egypt 376 347 231 214 431 439 3

All other 1,152 1,373 2,053 1,355 1,278 1,616 7

Total 3,890 4,354 5,081 3,890 4,564 5,077 5

Source: GTIS, Global Trade Atlas database (accessed February 6, 2012). 

Note: Totals may not add due to rounding. 

Russia 

Export Volume 

Russia has consistently been a major export market for Brazilian beef and was the single 

largest export market for Brazil’s beef in 2011. In 2011, exports to Russia accounted for 

22 percent of these exports by volume and 20 percent by value. Russia has been Brazil’s 

leading export market by value since 2008 (2007 on a volume basis). 

Russia is the world’s largest importer of beef. 55 However, production, imports, and 

consumption of beef in Russia have fallen from the levels reached in 2008 (table 9.4), 

and for 2006–11 Russia’s production and consumption of beef were significantly below 

the levels reached a decade earlier. Low productivity and reproductive inefficiency have 

caused Russia’s cattle sector to be unprofitable over the long term.56

 53 USDA, FAS, Livestock and Poultry: World Markets and Trade, April 2011, 8. 54 These restrictions are described below. 

55 USDA, FAS, PSD Online database (accessed February 6, 2012). 56 USDA, FAS, Russian Federation: Livestock Semi-annual Report, March 9, 2009, 4. 
9-13 

TABLE 9.4 Russia: Beef production, supply, and distribution, 2006–11

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

Percent

Production (1,000 mt carcass weight 

 equivalent, CWE) 1,450 1,430 1,490 1,460 1,435 1,405 –1

Imports (1,000 mt CWE) 1,018 1,087 1,200 1,005 1,020 1,050 1

Exports (1,000 mt CWE) 8 8 11 8 5 4 –13

Total supply (1,000 mt CWE) 2,468 2,517 2,690 2,465 2,455 2,455 0

Domestic consumption (1,000 mt CWE) 2,460 2,509 2,679 2,457 2,450 2,451 0

Per capita consumption (kg) 17.3 17.7 19.0 17.5 17.6 17.7 0

Source: USDA, FAS, PSD Online (accessed February 6, 2012). 

Brazil is by far the largest supplier of imported beef to Russia. In 2011, imports from 

Brazil accounted for 35 percent of the value of Russia’s beef imports.57 Other major 

suppliers to Russia include the EU-27, Uruguay, Paraguay, Australia, and Argentina. The 

United States is the seventh-largest supplier of imported beef to Russia (if the EU-27 is 

considered as a single market), accounting for 6 percent in 2010 (table 9.5). During 

2006–07, the Russian market was closed to U.S. beef imports due to concerns related to 

BSE. 

TABLE 9.5 Russia: Beef imports, by supplier, 2006–11 

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

Million $ Percent

Brazil 601 1,100 1,345 1,174 973 923 9

EU-27 229 136 211 98 303 386 11

Uruguay 184 59 272 239 274 301 10

Australia 55 34 264 87 183 277 38

United States (a

) (a) 104 47 143 217 1,509

All other 249 244 307 189 403 532 –3

 Total 1,688 1,900 2,827 2,444 2,370 2,636 9

Source: GTIS, global Trade Atlas database (accessed March 30, 2012). 

Note: Totals may not add due to rounding. 

 aLess than $500,00. 

Export Composition 

Russia’s beef imports from Brazil consist predominately of frozen boneless beef. Before 

2008, edible offal was the second-largest category of beef exports to Russia, and frozen 

beef liver accounted for the majority of this volume. After 2007, Brazil’s exports of 

frozen beef liver to Russia fell to zero and exports of all edible offal declined 

substantially (table 9.6).58 

 57 Global Trade Atlas, GTIS database (accessed March 30, 2012). 58 Brazil’s overall exports of edible offal increased substantially from 2006 to 2007 and increased 

slightly after 2007, as edible offal exports to Hong Kong, Iran, Egypt, and other countries more than offset 

the decline in exports to Russia. 
9-14 

TABLE 9.6 Brazil: Beef exports to Russia, 2006–11

 2006 2007 2008 2009 2010 2011 

Average annual 

change 2006–11

 Million $ Percent

Fresh/chilled (a) (a) (a) (a) (a) 3 45 

Frozen 743 968 1,430 911 1,023 1,011 6

Edible offal 13 7 (a

) (a) (a) (a) –53

Prepared or preserved (a

) (a) 1 1 (a) 1 116

 Total 756 975 1,431 912 1,024 1,015 6

 Metric tons 

Fresh/chilled 125 58 60 13 69 489 31

Frozen 318,198 447,938 382,610 327,207 284,840 228,333 –6

Edible offal 7,568 5,263 46 76 43 102 –58

Prepared or preserved 3 118 189 177 97 75 90

 Total 325,895 453,379 382,904 327,473 285,050 228,998 –7

Source: GTIS, Global Trade Atlas database (accessed February 6, 2012). 

Note: Fresh/chilled includes exports under HS 020110, 020120, and 020130; frozen includes exports under 

HS 020220 and 020230 (there were no exports under HS 020210); edible offal includes exports under HS 020610, 

020621, 020622, and 020629; prepared or preserved includes exports under HS 021020 and 160250. 

a

Less than $500,000. 

Import Restrictions 

Russia has established a tariff-rate quota (TRQ) system for beef, pork, and poultry 

imports. Within-quota beef imports are subject to a duty of 15 percent, while over-quota 

imports are subject to a duty of 50 percent. The quota for imports of fresh and chilled 

beef is largely allocated to the EU-27; U.S. producers have access only to a small “other 

country” within-quota volume. The quota for imports of frozen beef, however, has 

recently changed from one that was largely allocated to the EU-27 to one that is open to 

other suppliers, including the United States. Before 2010, nearly 80 percent of the frozen 

beef TRQ was allocated to the EU-27. However, for 2010, the EU-specific allocation was 

reduced and 85 percent of the frozen beef TRQ was allocated to “other countries.” In 

January 2011, the U.S. allocation was increased by 20,000 mt and the other country 

allocation was decreased by the same amount (table 9.7). The total TRQ volume was also 

increased. These changes in Russia’s beef TRQ are expected to benefit both Brazil and 

the United States over the EU-27.59 

Russia banned imports of beef, pork, and poultry from 89 Brazilian processing plants in 

the states of Mato Grosso, Paraná, and Rio Grande do Sul, effective June 15, 2011, due to 

sanitary problems. Brazil’s total beef exports in July fell 19 percent by volume, largely as 

a result of the ban. In August, Russia expanded the ban to an additional 37 plants, but in 

September agreed to allow imports from 7 of these plants “under special monitoring.” 

 59 Russia has announced that the total within-quota volume of beef imports for 2012 will remain 

unchanged from 2011, but has not yet announced country-specific allocations. USDA, FAS, Russian 

Federation: Customs Union Announces, December 28, 2011, 2–4. 
9-15 

TABLE 9.7 Allocations of frozen beef (HS 0202) imports under Russia’s TRQ system, 2007–11

2007 2008 2009 2010 2011

TRQ volume (1,000 mt) 440.0 445.0 450.0 530.0 530.0

EU allocation (1,000 mt) 347.6 351.6 355.5 60.0 60.0

U.S. allocation (1,000 mt) 18.1 18.3 18.5 21.7 41.7

U.S. allocation (percent) 4.1 4.1 4.1 4.1 7.9

Paraguay (1,000 mt) 3.0 3.0 3.0 0.0 0.0

Other countries (1,000 mt) 71.3 72.1 73.0 448.3 428.3

Within-quota duty (percent) 15 15 15 15 15

Over-quota duty (percent) 55 50 50 50 50

Source: Agreement Between the Government of the United States of America and the Government of the Russian 

Federation on Trade in Certain Types of Poultry, Beef, and Pork, June 15, 2005, Annex 2; USDA, FAS, Russian 

Federation: Livestock and Products Semi-Annual, 10; USDA, FAS, Russian Federation: Livestock and Products 

Semi-Annual, September 21, 2010, 18; Meat and Livestock Australia, “Russia Changes Frozen Beef Tariff Rate 

Quota Allocations,” January 10, 2011.

Russia is expected to become a member of the WTO in the near future, possibly by 

mid-2012.60 In the past, Russia’s sanitary measures have sometimes been viewed as 

nontransparent or not based on science. According to some industry sources, Russia’s 

WTO accession is expected to give exporting countries a means to ensure that Russia’s 

sanitary measures are consistent with international standards.61

Competition with the United States 

Like its imports from Brazil, most of Russia’s beef imports from the United States are of 

frozen boneless beef. As mentioned earlier, U.S. exporters have access to a 

country-specific TRQ allocation for imports of frozen beef muscle cuts. Russia banned 

imports of beef from the United States following the discovery of BSE in the U.S. cattle 

herd in December 2003, but allowed these imports to resume in 2008.62 In addition to 

frozen boneless beef muscle cuts, Russia also imports some edible beef offal (mostly 

frozen beef liver) and fresh beef from the United States. In 2010, these products 

accounted for 29.7 percent and 6.8 percent, respectively, of U.S. beef exports to Russia. 

EU-27 

Export Volume 

The EU-27 was the third largest beef producer in the world, by volume, but was also a 

major importer throughout 2006–11 (table 9.8). In 2006 and 2007, the EU-27 was 

Brazil’s largest export market for beef, accounting for roughly 25 percent of total exports. 

In 2008, however, the EU-27 briefly suspended beef imports from all Brazilian 

producers, because of disagreements over traceability of cattle and the ability of Brazilian 

 60 Russia is not yet a member of the World Trade Organization (WTO), but the WTO Ministers have 

adopted Russia’s terms of entry. Russia has 220 days from December 16, 2011 to ratify the terms of entry 

and would become a full-fledged WTO member 30 days after it notifies the ratification to the WTO. World 

Trade Organization, “Ministerial Conference Approves Russia’s WTO Membership,” December 16, 2011. 61 Meatingplace.com, “Russia’s WTO Membership,” November 23, 2011. 62 Russia allows imports of U.S. beef from cattle under 30 months of age produced under an approved 

AMS Export Verification (EV) program for beef to Russia. 

http://www.fsis.usda.gov/Regulations_&_Policies/Russia_Requirements/index.asp, (accessed March 13, 

2012). 
9-16 

TABLE 9.8 EU-27: Beef production, supply, and distribution, 2006–11

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

Percent

Production (1,000 mt CWE) 8,150 8,188 8,090 7,913 8,022 8,050 0

Imports (1,000 mt CWE) 717 642 466 497 437 370 –12

Exports (1,000 mt CWE) 218 140 204 148 337 475 17

Total supply (1,000 mt CWE) 8,867 8,830 8,556 8,410 8,459 8,420 –1

Domestic consumption (1,000 mt CWE) 8,649 8,690 8,352 8,262 8,122 7,945 –2

Per capita consumption (kg) 17.1 17.1 16.4 16.2 15.9 15.5 –2

Source: USDA, FAS, PSD Online (accessed February 6, 2012). 

authorities to certify that cattle meet EU-27 traceability requirements.63 Since then, Brazil 

has gradually expanded the list of eligible producers. As a consequence, Brazilian exports 

to the EU-27 declined and beef exported from Brazil to the EU-27 is subject to stringent 

sanitary and traceability requirements that have restricted the volume of trade. Brazil’s 

exports to the EU-27 declined 49 percent in quantity and 44 percent in value between 

2006 and 2011. In 2011, exports to the EU-27 accounted for 10 percent of Brazil’s beef 

exports on a volume basis and 15 percent of beef exports by value. 

Export Composition 

By volume, more than half of Brazil’s beef exports to the EU-27 in 2011 were of 

prepared or preserved beef (HS 1602.50). Almost all the remainder was frozen boneless 

beef (29 percent) and boneless fresh and chilled beef (19 percent). The average unit value 

for prepared or preserved beef, at $5.75 per kg, was much lower than for frozen beef, at 

$8.32 per kg, and for fresh and chilled beef, at $12.31 per kg (table 9.9). 

TABLE 9.9 Brazil: Beef exports to the EU-27, 2006–11

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

 Million $ Percent

Fresh/chilled 517 593 99 131 172 232 –15

Frozen 599 436 160 166 173 245 –16

Edible offal 5 4 2 1 1 1 –35

Prepared, or preserved 267 297 414 298 296 306 3

 Total 1,387 1,330 675 595 641 783 –11

 Metric tons 

Fresh/chilled 77,855 78,389 9,137 16,804 19,196 18,839 –25

Frozen 227,110 106,820 25,808 27,710 25,002 29,438 –34

Edible offal 2,179 1,830 628 252 242 157 –41

Prepared, or preserved 89,958 99,595 93,847 77,222 70,453 53,131 –10

 Total 397,101 286,635 129,422 121,988 114,892 101,565 0

Source: GTIS, Global Trade Atlas database (accessed February 6, 2012).

Import Restrictions 

Before 2008, the EU-27 was Brazil’s largest export market for beef, and in 2011 was 

Brazil’s second-largest export market for beef. Additionally, the EU-27 is a market for 

 63 USDA, FAS, EU-27: Livestock and Products: EU Suspends Brazil Beef Imports, February 1, 2008, 

1–2.
9-17 

higher-quality beef, with average unit values higher than those of Brazil’s other major 

beef export markets. The loss of many Brazilian producers’ eligibility to ship to the 

EU-27 market, therefore has been a substantial blow to the industry. 

The European Council Decision 79/542/EEC, December 21, 1976, established a list of 

third countries and regions from which member states were authorized to import cattle, 

swine, and fresh, chilled, and frozen meat. The Decision has been amended numerous 

times in response to animal disease outbreaks and other sanitary conditions. As of 

January 2008, over 6,000 producers in Brazil were authorized to export beef to the 

EU-27. 64 Then, on January 17, 2008, the European Commission (EC) amended the 

Decision in order to address what the EC described as Brazil’s noncompliance with 

registration, identification, and movement requirements, and the failure to respect 

commitments to take corrective measures.65 

The EC delisted all Brazilian cattle producers as of January 31, 2008. In February 2008, 

however, 95 farms were relisted, and the list of eligible producers has since expanded. 

The number of eligible farms was approximately 2,000 in July 2010, and is expected to 

be increased to about 2,200 by the end of 2011.66 

Although Brazil remained the largest supplier of imported beef to the EU-27 in 2011, 

accounting for 31 percent of EU-27 beef imports, the annual value of EU imports from 

Brazil during 2008–11 was substantially below the value in 2006 and 2007 (table 9.10). 

In 2011, exports to the EU-27 accounted for 15 percent of Brazil’s beef exports, on a 

value basis, down from 36 percent in 2006. 

TABLE 9.10 EU-27: Beef imports, by supplier, 2006–11

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

 Million $ Percent

Brazil 1,361 1,431 739 603 645 764 –11

Argentina 505 653 811 703 618 650 5

Uruguay 192 209 458 380 351 384 15

United States 11 25 53 68 113 186 77

Australia 60 57 89 88 88 133 17

New Zealand 28 34 102 94 81 122 34

All other 114 163 167 194 244 204 12

 Total 2,270 2,572 2,418 2,129 2,141 2,443 1

Source: GTIS, Global Trade Atlas database (accessed March 30, 2012). 

Note: Totals may not add due to rounding.

 64 USDA, FAS, EU-27: Livestock and Products: EU Suspends Brazil Beef Imports, February 1, 2008, 

2; USDA, FAS, EU-27: Livestock and Products Annual 2008, August 21, 2008, 13. 65 European Commission (EC) Decision 2008/61/EC, January 17, 2008, 1. 

66 Government official, e-mail to USITC staff, June 16, 2011. 
9-18 

Tariff-Rate Quotas 

Brazil and the United States both have access to the EU-27 market through TRQ 

allocations for high-quality beef.67 Brazil has access to a 10,000 mt quota for boneless 

beef and skirt meat at an ad valorem duty rate of 20 percent.68 In comparison, the overquota duty on fresh and chilled boneless beef imports is 12.8 percent plus €3.034/kg. The 

over-quota duty on frozen boneless beef imports is 12.8 percent plus €2.211/kg. 69

However, stringent traceability requirements plus the requirement that cattle be 

exclusively grass-fed have effectively limited Brazil’s exports under this quota.70 During 

the July 1, 2009 through June 30, 2010 quota year, Brazil’s exports under the quota were 

450 mt, a fill rate of only 4.5 percent.71 As a result, most of Brazil’s exports paid the 

above-quota tariff. In comparison, most U.S. beef exports to the EU-27 were within 

quota. 

U.S. beef exports to the EU-27 have increased 10-fold since 2006. All U.S. beef exports 

to the EU-27 must meet the requirements of the Non-Hormone Treated Cattle (NHTC) 

program. In August 2010, the United States and the EU-27 reached a memorandum of 

understanding in their long-running dispute over beef hormones. As part of the negotiated 

settlement, the EU-27 increased U.S. beef access to the EU-27 market by establishing a 

quota for 20,000 mt of high-quality grain-fed beef at zero duty. In the most recent quota 

year this 20,000 mt quota was essentially filled (96 percent), with U.S. exports under this 

quota estimated at 15,000 mt. The European Parliament has approved an expansion of 

this quota to 48,200 mt, effective August 2012.72 The quota is currently shared with 

Australia, Canada, New Zealand, and Uruguay. 

The United States has additional access to the EU-27 market for high-quality beef and 

bison meat at an ad valorem duty rate of 20 percent through a 11,500 mt quota that is 

shared with Canada. In the most recent quota year, only 519 mt were shipped within this 

quota, a fill rate of 4.5 percent. As this quota is shared with Canada and some imports 

under this quota are of bison, it is estimated that U.S. beef shipments under this quota in 

the most recent quota year were only approximately 100 mt.73

 67 Regulations specify the requirements for beef imported under each of the quotas, and note that the 

indication ‘High Quality Beef’ may be added to the information on the label. Requirements for Brazil require 

that cattle be exclusively grass-fed. Quota years run from July 1 to June 30. 68 Skirt steak is a long, flat muscle cut from the beef flank and plate area that is prized for its flavor. 69 Fresh/chilled boneless beef imports under HS 0201.31.00.90, skirt meat under HS 0206.10.95.90, 

and frozen boneless beef under HS 0202.30.50.99. EC, Taxation and Customs Union, Taric Measure 

Information, May 12, 2011, http://ec.europa.eu/taxation_customs/dds2/taric/taric_consultation.jsp?Lang=en. 70 Meat and Livestock Australia, “EU rejects Brazil’s ‘Hilton’ modification request,” June 20, 2011. 71 EC Directorate-General for Agriculture and Rural Development, “Beef Import Quotas – Certificates 

of Authority Issued, Cumulated Quantity up to 30/06/2011;” government official, e-mail to USITC staff, 

September 1, 2011. 72 European Parliament Press Service Press Release, “Win-win ending to the ‘Hormone Beef Trade 

War,’” March 14, 2012. 73 Government official, e-mail to USITC staff, September 1, 2011. 
9-19 

Competition with the United States 

Over time, EU-27 imports of beef are predicted to increase.74 Brazil and the United States 

are both significant suppliers of beef to the EU-27, and competition between Brazilian 

and U.S. producers in the EU-27 beef market is largely dependent on TRQs. The 

memorandum of understanding between the U.S. and the EU-27 in connection with the 

beef hormone dispute provides for the possibility of expanding U.S. exporters’ access to 

the EU-27 for high-quality beef, potentially entering up to 45,000 mt at zero duty.75 This 

improved access to the EU-27 market would be expected to improve U.S. exporters’ 

competitive position. If, on the other hand, Brazil regains access to the EU-27 market for 

many of its producers that lost access in 2008, this would favor imports from Brazil.76 

Hong Kong and China 

Volume of Exports 

Brazil’s beef exports to Hong Kong increased substantially in 2008 after Brazil lost much 

of its access to the EU-27 beef import market. In 2011, Hong Kong was Brazil’s 

fourth-largest beef export market by value and its second-largest by volume. In 2011, 

exports to Hong Kong accounted for 14 percent of Brazil’s beef exports on a volume 

basis and 11 percent of beef exports by value. Like most of Brazil’s export markets for 

beef, Brazil’s beef exports to Hong Kong are predominantly of frozen boneless beef. 

Unlike Brazil’s other major export markets, Hong Kong is also a major export market for 

Brazil’s edible beef offal. 

China has the world’s third-largest cattle herd and calf production, behind India and 

Brazil, and is the fourth-largest beef producer behind the United States, Brazil, and the 

EU-27. Officially, China imports little beef, yet the Commission is aware that beef 

shipments sent to neighboring countries may reach China through “gray market” 

channels.77 Nonetheless, even including possible gray market imports, China is largely 

self-sufficient in beef (table 9.11). 

Export Composition 

Brazil’s beef exports to Hong Kong are predominantly of frozen boneless beef and frozen 

edible offal (table 9.12). Most U.S. beef exports to Hong Kong are also of frozen 

boneless beef, but frozen bone-in beef accounts for a significant share as well. Edible 

offal accounts for a smaller share of U.S. beef exports to Hong Kong, compared to 

Brazil’s exports. 

 74 European Commission, Prospects for Agricultural Markets and Income in the EU, December 2010, 

32, table A12; FAPRI 2011 Agricultural Outlook. 75 United States of America and European Commission, Memorandum of Understanding, May 13, 

2009. 76 See chapter 11 for a discussion of the impact of the removal of EU-27 NTMs that restrict imports of 

beef from the United States and Brazil. 77 USDA, FAS, China: Livestock and Products Semi-Annual, March 9, 2009, 3; USDA, FAS, China: 

Livestock and Products Annual, September 2009, 2, 4. 
9-20 

TABLE 9.11 China and Hong Kong: Beef production, supply, and distribution, 2006–11

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

 Percent

China 

 Production (1,000 mt carcass 

 weight equivalent, CWE) 5,767 6,134 6,132 5,764 5,600 5,550 -1

 Imports (1,000 mt CWE) 10 12 6 23 40 42 3

 Exports (1,000 mt CWE) 85 81 58 38 51 60 –7

 Total supply (1,000 mt CWE) 5,777 6,146 6,138 5,787 5,640 5,592 –1

 Domestic consumption (1,000 mt CWE) 5,692 6,065 6,080 5,749 5,589 5,532 –1

 Per capita consumption (kg) 4.3 4.6 4.6 4.3 4.2 4.1 –1

Hong Kong 

 Production (1,000 mt CWE) 14 15 15 15 15 15 1

 Imports (1,000 mt CWE) 89 90 118 154 154 120 6

 Exports (1,000 mt CWE) (a

) (a) (a) (a) (a) (a) (b)

 Total supply (1,000 mt CWE) 103 105 133 169 169 135 6

 Domestic consumption (1,000 mt CWE) 103 105 133 169 169 135 6

 Per capita consumption (kg) 14.8 15.0 19.0 24.0 23.8 19.0 5

Source: USDA, FAS, PSD Online (accessed February 6, 2012). 

 aNot reported. 

b

Not applicable. 

TABLE 9.12 Brazil: Beef exports to China and Hong Kong, 2006–11

 2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

 Million $ Percent

Fresh/chilled 2 2 2 1 (

a

) 1 –19

Frozen 59 96 223 319 240 337 42

Edible offal 50 82 131 162 148 208 33

Prepared or preserved (

a

) 4 13 1 1 (

a

) 4

 Total 111.3 183.7 369.0 481.8 388.7 545.6 37

 Metric tons 

Fresh/chilled 605 485 471 158 66 139 –25

Frozen 27,062 40,313 64,269 101,906 68,075 76,392 23

Edible offal 40,372 48,959 53,236 60,456 55,986 68,777 11

Prepared or preserved 196 1,608 4,041 263 172 127 –8

 Total 68,235 91,365 122,018 162,783 124,300 145,435 16

Source: GTIS, Global Trade Atlas database (accessed February 6, 2012). 

Note: Fresh/chilled includes exports under HS 020110, 020120, and 020130; frozen includes exports under 

HS 020210, 020220 and 020230; edible offal includes exports under HS 020610, 020621, 020622, and 020629; 

prepared or preserved includes exports under HS 021020 and 160250. 

a

Less than $500,000. 

Competition with the United States 

China imposes the same rates of duty on imports of beef from Brazil and the United 

States. The rate is 12 percent ad valorem on boneless and bone-in beef, edible beef offal, 

and prepared or preserved beef. Beef imports enter Hong Kong duty free. The Chinese 

market has been closed to U.S. beef since the detection of BSE in the U.S. cattle herd in 

December 2003. In June 2006, the government of China offered to allow imports of 

boneless U.S. beef from cattle less than 30 months of age. However, approval was subject 

to a number of stipulations, many unrelated to BSE risk, and an agreement has not been 
9-21 

reached. Hong Kong also banned imports of U.S. beef in December 2003, but resumed 

imports of U.S. boneless beef from cattle less than 30 months of age in December 2005.78 

China does now allow some imports of beef from Brazil, after having halted all such 

imports in 2005 because of the presence of FMD in Brazil. In January 2010, China 

agreed to begin accepting beef imports from some regions of Brazil.79 However, beef 

packers have been required to be individually certified by China’s National Certification 

and Accreditation Administration. As of April 2011, five plants had been certified to ship 

to China.80 

Exports of beef to Hong Kong from both Brazil and the United States increased during 

2006–11, with U.S. exports increasing at a faster rate than Brazil’s exports (table 9.13).81

While the Commission is aware of allegations of re-exports of beef to China from 

neighboring countries, the Commission is not in a position to evaluate this issue given the 

lack of conclusive data. 

TABLE 9.13 China and Hong Kong reported beef imports, 2006–11 

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–10

 Million $ Percent

China 

 Australia 13 16 22 27 39 59 363

 Uruguay 1 7 4 15 25 34 2,371

 New Zealand 5 4.54 1 8 7 11 141

 Brazil (a

) 1 (a) 3 32 9 1,961

 United States 0 (a

) (a) 0 0 0 (b)

 All other (a

) (a) (a) 1(a) (a) –90

 Total 19 29 28 53 104 112 477

Hong Kong 

 Brazil 189 284 465 605 533 588 211

 United States 16 37 55 95 139 243 1,421

 Argentina 40 50 57 87 86 121 200

 Australia 34 50 82 121 90 94 182

 Canada 33 30 34 36 77 91 172

 All other 72 78 121 173 165 226 214

 Total 384 528 814 1,117 1,091 1,363 255

Source: GTIS, Global Trade Atlas database (accessed April 17, 2012). 

a

Less than $500,000. 

b

Not applicable. 

Egypt 

Export Volume 

In 2011, exports to Egypt accounted for 10 percent of Brazil’s beef exports on a volume 

basis and 9 percent of beef exports by value. Egypt’s beef production is largely 

dependent on the state of its dairy herd. Egypt experienced disease outbreaks in 2009 and 

 78 USDA, FAS, Hong Kong Livestock and Products Semi-annual, February 1, 2006, 3. 79 Meat Trade News Daily, “Brazil: Beef Exports to China Resume,” January 27, 2010. 80 Meat and Livestock Australia, “China and Brazil to Facilitate Beef Trade,” April 20, 2011. 81 U.S. beef exports to Vietnam increased even more rapidly during 2006–11. 
9-22 

2010 that led many dairy producers to slaughter their cattle and that also lowered the 

calving rate. The resulting higher beef prices encouraged still more producers to slaughter 

dairy cattle for beef, leading to declines in both the cattle herd and beef production 

(table 9.14).82 This led to increased imports in 2010 (table 9.15).83 Egypt also imports live 

cattle, mostly for immediate slaughter. Imports of live cattle, predominately from 

Australia, increased from 19,000 head in 2006 to 140,000 in 2010.84

TABLE 9.14 Egypt: Beef production, supply, and distribution, 2006–11

2006 2007 2008 2009 2010 2011 

Average annual 

change 2006–11

 Percent

Production (1,000 mt CWE) 465 365 350 355 330 315 –7

Imports (1,000 mt CWE) 292 293 166 180 260 230 –5

Exports (1,000 mt CWE) 0 0 0 0 0 0 0

Total supply (1,000 mt CWE) 757 658 516 535 590 545 –6

Domestic consumption (1,000 mt CWE) 757 658 516 535 590 545 –6

Per capita consumption (kg) 10.2 8.7 6.7 6.8 7.3 6.6 –8

Source: USDA, FAS, PSD Online (accessed February 6, 2012). 

Note: Data in carcass weight equivalent (CWE) are not directly comparable with data in product weight. 

TABLE 9.15 Egypt: Beef imports, by supplier, 2006–10

2006 2007 2008 2009 2010 

Average annual

change 2006–10 

 Million $ Percent

Brazil 376 386 174 182 371 (a)

India 11 86 273 193 278 123

United States 56 65 77 77 106 17

Australia 1 2 4 4 41 203

New Zealand (b) (b) (b) 1 5 121

Argentina 25 14 2 12 4 –35

All other 4 8 52 27 26 60

 Total 473 561 582 496 831 15

Source: GTIS, Global Trade Atlas database (accessed November 22, 2011). 

Note: Totals may not add due to rounding. 

a

Rounds to zero. 

b

Less than $500,000.

Competition with the United States 

Although Brazil and the United States are both major suppliers of beef to Egypt, beef 

from Brazil and the United States do not often compete head-to-head. Exports of edible 

beef offal accounted for 60 percent of U.S. beef exports to Egypt by value and for over 

three-quarters of such exports by volume, while exports from Brazil are largely frozen 

beef meat (table 9.16). Brazilian frozen beef muscle cuts are largely sold to more priceconscious segments such as the package tourism industry, while U.S. beef muscle cuts 

 82 USDA, FAS, Egypt: Livestock and Products Annual, September 2, 2010, 2. 83 Full-year 2011 data on Egypt’s beef imports are not yet available. 84 USDA, FAS, PSD Online (accessed October 12, 2011); Global Trade Atlas GTIS database. 
9-23 

TABLE 9.16 Brazil: Beef exports to Egypt, 2006–11

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

 Million $ Percent

Fresh/chilled (a) 0 0.4 0.1 0 0.5 91

Frozen 364.2 333.1 209.9 200.1 410.0 413.1 3

Edible offal 4.6 4.9 9.4 7.0 5.0 6.7 8

Prepared, or preserved 7.7 9.2 11.6 6.7 15.9 18.7 20

 Total 376.5 347.3 231.2 213.8 430.8 439.0 3

 Metric tons 

Fresh/chilled 5 0 75 25 0 126 91

Frozen 198,142 174,188 64,919 71,955 113,228 98,811 –13

Edible offal 5,740 5,542 7,707 6,560 3,975 4,044 –7

Prepared, or preserved 3,115 3,616 3,713 2,154 4,601 4,149 6

 Total 207,002 183,345 76,414 80,694 121,804 105,130 –13

Source: GTIS, Global Trade Atlas database (accessed February 6, 2012). 

 aLess than $50,000. 

are largely sold in the hotel and restaurant segment to international restaurant and hotel 

chains. Within the package tourism industry, Brazilian beef competes with imports of 

beef from India and with imports of U.S. edible beef offal. Recent sanitary problems 

experienced with imports from India are expected to benefit both Brazil’s exports of beef 

and U.S. exports of edible beef offal to Egypt.85 Prepared and preserved beef—including 

canned beef and other cooked products—accounts for about 4 percent of Brazil’s exports 

to Egypt, while they make up less than 1 percent of U.S. beef exports to Egypt.

 85 USDA, FAS, Egypt: Livestock and Products Annual, September 2, 2010, 3–4. 
9-24 

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———. “List of FMD Free Members.” http://www.oie.int/index.php?id=246. 

10-1

CHAPTER 10 

Pork 

Overview 

Brazil is the world’s fourth-largest producer and fourth-largest exporter of pork. Brazil’s 

commercial swine and pork producers are globally competitive, using modern, efficient 

methods and genetics. However, sanitary measures, predominantly those related to 

diseases such as foot-and-mouth disease (FMD), prohibit Brazil from exporting to many 

of the largest importing markets, including Japan, Mexico, and Canada, the largest export 

markets for U.S. pork. As a result of these sanitary restrictions, Brazil has confined its 

pork exports to a limited number of markets and has become heavily dependent on its 

largest export market, Russia.1

 As Russia has increased its own pork production in recent 

years, it has proven to be an unreliable export market, and Brazil’s total pork exports 

declined in volume during 2006–11. 

Brazil is addressing the sanitary restrictions both by attempting to eradicate diseases such 

as FMD from the entire country and by having regions of the country recognized as being 

disease-free. If Brazil is successful in achieving access for its pork in markets that have 

traditionally been closed, exports are likely to increase rapidly, as many of Brazil’s major 

pork producers are also major producers of poultry that have already established export 

markets and trading relationships.2

 

Exports have not kept pace with increases in production during 2006–11. In 2011, 

Brazil’s pork exports were equivalent to approximately 18 percent of production, 

compared to 23 percent in 2006.3

 Brazil’s main export markets for pork in 2011 were 

Russia, Hong Kong, Ukraine, Argentina, and Angola. 

Brazil is a major pork consumer and ranked fifth in global consumption in 2010.4

 Yet 

domestic pork consumption lags far behind consumption of beef and broiler meat. The 

relatively small size of the domestic market means that a disruption in exports may have 

a greater impact on pork producers than on beef or poultry producers. Statistics for the 

production, consumption, and trade of major pork producers and importers in 2011 (in 

metric tons carcass weight) are presented in table 10.1. 

 

 1

 Associação Brasileira da Indústria Produtora e Exportadora de Carne Suina (ABIPECS), Annual 

Report 2008, 2009, 2. 2

 See chapter 5 for a description of Brazil’s globally integrated livestock producers. 3

 USDA, FAS, PSD Online (accessed February 15, 2012). 

4

 USDA, FAS, Livestock and Poultry: World Markets and Trade, April 2011, 9. 
10-2

TABLE 10.1 Pork: Production, consumption, and trade, selected producers and markets, 2011 (1,000 mt 

carcass wt) 

Production Consumption Imports Exports Trade balance

Producers 

 China 49,500 49,810 550 260 –290

 EU-27 22,530 20,545 15 2,000 1,985

 United States 10,278 8,384 379 2,246 1,867

 Brazil 3,227 2,646 1 582 581

 Russia 1,965 2,894 930 1 –929

 All other 13,627 16,570 4,391 1,485 –2,906

 Total 101,127 100,849 6,266 6,574 –

Selected major importers 

 Hong Kong 114 474 360 0 –360

 Japan 1,255 2,481 1,210 0 –1,210

 Korea 835 1,470 625 0 –625

 Canada 1,753 793 195 1,160 965

 Subtotal 2,204 4,425 2,195 0 –2,195

Source: USDA, FAS, PSD Online database (accessed February 6, 2012). 

Brazilian Production, Consumption, and Trade 

Brazil’s pork production primarily serves its domestic market, and over the past five 

years, domestic consumption has grown more rapidly than production. However, as noted 

above, Brazil’s per capita consumption of pork is relatively low compared to countries 

such as the United States and the EU-27, and compared to its consumption of beef and 

broiler meat (table 10.2). 

TABLE 10.2 Brazil: Swine and pork production, supply, and distribution, 2006–11 

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

Percent

January 1 sow inventory (1,000 head) 3,030 3,040 2,970 2,960 2,890 2,925 –1

Swine production (1,000 head) 33,304 34,530 34,845 35,890 36,970 37,750 3

Swine slaughter (1,000 head) 31,515 33,110 32,700 33,510 34,290 34,870 2

Pork production (1,000 mt) 2,830 2,990 3,015 3,130 3,195 3,227 3

Pork imports (1,000 mt) 0 0 0 0 1 1 (a

)

Pork exports (1,000 mt) 639 730 625 707 619 582 –2

Domestic consumption (1,000 mt) 2,191 2,260 2,390 2,423 2,577 2,646 4

Per capita consumption (kg) 11.4 11.7 12.2 12.2 12.8 13.0 3

Source: USDA, FAS, PSD Online database (accessed February 6, 2012). 

 aNot applicable. 

Brazil’s pork production became more efficient during 2006–11. Brazil’s production of 

swine and pork increased in this period even as the number of sows declined. In addition, 

most swine slaughter in Brazil is under federal inspection. Traceability under federal 

inspection is assumed to reduce food safety risks, increasing competitiveness in exports. 

The share under federal inspection increased from 77.7 percent in 2004 to 83.1 percent in 

2009.5

 

 5

 ABIPECS Annual Report 2010, 2011, 6. 
10-3

Industry Structure 

Swine production in Brazil consists of both subsistence producers, raising swine largely 

for home consumption, and commercial operations. In 2008, it was estimated that 

subsistence producers accounted for 26 percent of breeding sows in Brazil and 10 percent 

of swine produced, down from 38 percent of sows and 14 percent of swine produced in 

2006.6

 Pork production by subsistence producers accounted for only about 10 percent of 

Brazil’s production in 2010 as well.7

 

The continued shift to commercial production has made Brazil’s pork producers more 

competitive in global export markets, as Brazil’s commercial swine producers are much 

more productive than subsistence producers. The movement towards greater commercial 

swine production, along with improvements in swine genetics, better meet pork 

producers’ requirements for a standardized input. At the same time, stringent 

requirements in export markets have encouraged higher-quality pork production in 

Brazil.8

 As pork produced in commercial operations under federal inspection is more 

likely to be eligible for export, such production has increased more rapidly than Brazil’s 

overall pork production over the last five years. 

The average size of commercial swine operations in Brazil is smaller than the average 

size in the United States. Reportedly, smaller Brazilian swine producers find it easier to 

gain access to government-subsidized low-cost financing for capital improvements. 9

Typical slaughter facilities in Brazil are also smaller than most facilities in the United 

States. Their smaller size may lessen these enterprises’ ability to supply large volumes of 

specific cuts. 

Another difference between U.S. production and that of Brazil is that many swine 

producers in Brazil grow much of their own feed. Integrated producers often grow much 

of the grain used to formulate the swine ration that is provided to the facilities where hogs 

are raised to market weight. 10 This may partially insulate these producers from 

fluctuations in the cost of feed grains. 

Regional Production 

Brazil’s swine and pork production is predominately in the southern states of Paraná, 

Santa Catarina, and Rio Grande do Sul. Nationally, the number of swine in Brazil 

increased 7 percent in 2006–10, and pork production increased 13 percent. 11 Santa 

Catarina is the leading swine-producing state in Brazil, with 20 percent of the total swine 

inventory in 2010, up from 16 percent in 2000 and 2005. 

Traditionally, pork was produced in Brazil primarily in the coastal states. More recently, 

production has declined in northern states and increased in the Southeast, the 

 6

 ABIPECS Annual Report 2008, 2009, 4; ABIPECS Annual Report 2006, 2007, 12–13. 7

 ABIPECS Annual Report 2010, 2011, 3. 8

 Neves, Saab, and Prado, “Analyzing Some Relationships,” 2008, 5, 2. 9

 Industry representative, interview by USITC staff, Washington, DC, July 7, 2011. 

10 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 11 USDA, FAS, Livestock and Poultry: World Markets and Trade, October 2010, 20, 28; USDA, FAS, 

Livestock and Poultry: World Markets and Trade, April 2011, 9, 17. 
10-4

Center-West, and the South. Between 2005 and 2010, the swine herd expanded most 

rapidly in the Center-West, although the top three pork-producing states are still located 

in the South region. 

Since 2000, swine production has increased most rapidly in Mato Grosso. The state of 

Mato Grosso accounted for just 3 percent of Brazil’s swine herd in 2000, rising to more 

than 5 percent in 2010. Swine production has been migrating to the Center-West region 

because of lower feed costs.12 Corn and soybean production have increased rapidly in 

Mato Grosso, and the costs of these major inputs into swine feed are lower in Mato 

Grosso than in traditional swine-producing states such as Santa Catarina. Improvements 

in transportation infrastructure in the Center-West would be expected to lead to further 

production increases in the Center-West region and increase the competitiveness of 

Brazilian pork in global markets.13

The sources of Brazil’s pork exports are more concentrated geographically than the swine 

herd. More than three-fourths of pork exports in 2011 were from the South region. But in 

2006–10, the share of exports from the Center-West generally increased at the expense of 

exports from the South and Southeast (table 10.3). 

TABLE 10.3 Export share by region (volume) 

Region 2006 2007 2008 2009 2010 2011

 Percent 

South 82 77 82 71 75 79

Southeast 12 6 7 16 8 6

Center-West 6 9 11 13 17 15

All other 0 9 0 0 1 0

Source: ABIPECS, “Brazilian Pork Exports by State.” 

Consumption 

Pork consumption has been increasing in Brazil, but is much lower than consumption of 

beef and poultry. In 2010, Brazil’s per capita consumption of pork was 12.8 kg, 

compared to 37.8 kg for beef and 45.4 kg for broiler meat.14 Brazil’s per capita pork 

consumption in 2010 was less than half that of the EU-27, China, or the United States.15

Brazil’s domestic consumption of pork has increased over the last five years more rapidly 

than beef consumption, but more slowly than broiler consumption.16

 12 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 31, 2011. 13 See chapter 3 for a description of Brazil’s transportation infrastructure. 

14 USDA, FAS, PSD Online (accessed October 12, 2011). 

15 In 2010, per capita pork consumption in the EU-27, China, and the United States was 43.2, 37.9, and 

27.9 kg, respectively. USDA, FAS, Livestock and Poultry: World Markets and Trade, April 2011, 20. 16 USDA, FAS, Livestock and Poultry: World Markets and Trade, October 2010, 18, 20, 22; USDA, 

FAS, Livestock and Poultry: World Markets and Trade, April 2011, 7, 9, 11. Neves, Saab, and Prado report 

that the share of pork in Brazil’s domestic meat consumption has declined over the long run, i.e., since the 

1970s; see “Analyzing Some Relationships,” 2008, 3–4. 
10-5

Trade 

Reportedly, Brazil tends to export different cuts of pork than those it consumes. Ham and 

processed pork products derived from shoulder cuts account for the majority of Brazil’s 

domestic pork consumption. Russia and Ukraine were reportedly developed as export 

markets for pork loins, which are not widely consumed in Brazil. Export markets in Asia 

were reportedly developed as outlets for other cuts and trim. 17 These differences in 

composition would make it more difficult for producers to shift pork to the domestic 

market in response to a disruption in an export market. 

Brazil is ineligible to export to some of the largest importers of pork, including Japan and 

Korea, because of sanitary measures.18 Until recently, Brazil was also ineligible to export 

to China, the world’s largest producer and consumer of pork. However, in May 2011, 

three slaughterhouses in Brazil were authorized to export pork to China. 19 Seara 

Alimentos, part of the Marfrig group, began shipments in November 2011. Aurora 

Alimentos began shipments in February 2012, and Brazil Foods began shipping pork to 

China in March 2012.20 China is a major destination market for U.S. pork, and opening 

China’s pork market to exports from Brazil would increase competition between 

Brazilian and U.S. pork. Brazil’s exports to its largest markets for pork are depicted in 

figure 10.1. 

Primary Factors Affecting Competitiveness 

Efficiency 

By some measures, U.S. swine producers are more efficient than those in Brazil. One 

measure of productive efficiency in the swine industry is the quantity of pork produced 

per sow per year. In 2011, producers in Brazil averaged 1,103 kilograms (kg) of pork per 

sow in the breeding herd, compared to 1,779 kg for U.S. producers. A related measure is 

the ratio of the number of hogs produced to the number of sows each year. In Brazil, this 

ratio ranged from 11.0 in 2006 to 12.9 in 2011, compared to 17.5 in 2006 and 19.9 in 

2011 in the United States. 21 However, Brazil’s national productivity measures are 

negatively influenced by the country’s remaining subsistence producers. Brazil’s national 

pork producers association, Associação Brasileira da Indústria Produtora e Exportadora 

de Carne Suina (ABIPECS), reports that in 2008, Brazil’s national average number of 

finished hogs produced per sow was 15.6, but that the number was 21.4 for commercial 

producers and 5.6 for subsistence producers. Further, the carcass weight of finished pigs 

from commercial operations averaged 82.1 kg, compared to 67.9 kg for subsistence 

producers.22

 17 Industry representative, interview by USITC staff, Washington, DC, July 7, 2011. Trim consists of 

small pieces of meat or fat removed when primal cuts are removed from the carcass or when smaller cuts of 

meat are fabricated. 18 Recently, a limited number of pork producers in Santa Catarina became eligible to export pork to the 

United States. This development is described below. 19 Brazilian Meat Monitor, “Three Companies Get Permission to Sell Pork to China,” May 30, 2011. 20 TheMeatSite.com, Brazil Foods Ships Pork to China, March 1, 2012. 21 USDA, FAS, PSD Online (accessed February 8, 2012).

22 ABIPECS, Annual Report 2008, 2009, 12–13. 
FIGURE 10.1 Competition between U.S. and Brazilian pork exports in 2011 was limited by sanitary restrictions o

Source: Compiled by USITC staff using data from GTIS, Global Trade Atlas database (accessed February 13, 2012). 

10-6 
10-7

In fact, commercial swine producers in Brazil are reported to be among the most efficient 

in the world. A 2004 comparison of efficiency in swine production found that the 

lowest-cost producing countries were Brazil, Canada, and the United States. In this 

survey, commercial producers in Brazil surpassed U.S. producers in several measures of 

efficiency, including the number of pigs produced per sow, overall mortality, and feed 

conversion.23 A survey of pig producers in 2010 (which did not include the United States) 

found that production costs were roughly one-third lower in Brazil than the average for 

the European Union (EU-27) and Canada.24 

Cost of Production25

As in the United States, the cost of feed is the largest element in the cost of raising swine 

commercially in Brazil.26 This cost is largely driven by prices for corn and soybean meal, 

the principal components of swine feed. Prices for corn and soybean meal in both Brazil 

and the United States largely reflect global prices.27 

Swine producers in Mato Grosso, which has the most rapidly expanding swine herd in 

Brazil, have a minor cost advantage over those in Santa Catarina, which has the largest 

swine herd. Slightly higher fixed costs in Mato Grosso have countered some of the feed 

cost advantage enjoyed by swine producers in that state, but the total cost advantage in 

Mato Grosso still increased between 2006 and 2010. In 2006, the average total cost to 

produce one kg of pork in Mato Grosso was 98 percent of the cost for producers in Santa 

Catarina. In 2010, even with a slightly greater increase in relative feed costs, the cost to 

produce pork in Mato Grosso decreased to 96 percent of the cost in Santa Catarina 

(table 10.4). 28 Expanded production and exports from lower-cost producers in the 

Center-West would be expected to make Brazil more cost competitive in global markets. 

Most of Brazil’s corn production and a significant fraction of its soybean production is 

consumed as animal feed. Because corn and soybean meal are globally traded 

commodities, the prices for corn and soybean meal in Brazil have generally tracked 

movements in international prices. However, there can be significant regional differences 

in price because of local market conditions and transportation issues. The regional 

differences in the cost of feed ingredients influence where swine producers locate or 

 23 Rasmussen, “Costs in International Pig Production,” 2006, table 5. 24 ThePigSite.com, “InterPIG 2010 Results,” October 3, 2011. 25 Companhia Nacional de Abastecimento (CONAB) publishes cost of production data for swine 

producers in Brazil, by state. The USDA’s ERS likewise publishes annual cost of production data for U.S. 

swine producers. A large share of swine producers in Brazil participate in all stages of swine production, 

from breeding through final sale of market hogs. Therefore, cost of production data for producers in Santa 

Catarina and Mato Grosso can be compared to costs of production for farrow-to-finish producers in the 

United States, in order to provide comparable data on the entire cost of production. Reported cost data for 

swine production in Brazil do not include the opportunity cost of unpaid labor. In 2010, this accounted for 

10.2 percent of reported total cost for U.S. farrow-to-finish producers. 26 Neves, Saab, and Prado, “Analyzing Some Relationships,” 2009, 5. Other ingredients can be 

substituted for corn and soybean meal, but their costs and nutritional value are typically weighed against 

those of corn and soybean meal. 27 See chapter 8, box 8.1. 

28 Note that these reported costs include only costs to raise swine and do not include the costs of 

slaughter and transportation. 
10-8

TABLE 10.4 Swine: Average costs of production in Santa Catarina and Mato Grosso Brazil, 2006–10 

2006 2007 2008 2009 2010 

Average annual 

change 2006–10

R$/kg Percent

Santa Catarina 

 Feed 1.15 1.44 1.77 1.70 1.44 6

 Other variable costsa

 0.31 0.40 0.43 0.44 0.53 15

 Fixed costsb

 0.12 0.11 0.12 0.11 0.12 0

 Total 1.57 1.95 2.30 2.25 2.09 7

Mato Grosso 

 Feed 1.00 1.12 (c) (c) 1.38 8

 Other variable costs 0.36 0.45 (c

) (c) 0.42 4

 Fixed costs 0.18 0.18 (c

) (c) 0.20 3

 Total 1.54 1.74 (c

) (c) 2.00 7

Source: Companhia Nacional de Abastecimento, “Custo de Produção de Suinos para Abate,” 2006 through 2010. 

a

Variable costs include labor and benefits, veterinary expenses, utilities, and transportation costs. b

Fixed costs include depreciation of fixed assets and interest. 

c

Not available. 

expand operations.29 Center-West states have significantly increased their production of 

corn and soybeans during 2006–10 (box 10.1). 

BOX 10.1 Availability of Feed Impacts Swine and Poultry Production 

Both poultry feed and swine feed are typically largely composed of corn and soybean meal. Corn provides energy, 

and soybean meal provides protein. Poultry and swine feed typically are composed of two-thirds or more corn by 

weight, and most of the balance is soybean meal.a

 

Feed typically accounts for more than half of the total cost of raising poultry and swine in both the United States and 

Brazil. Feed is also relatively expensive to transport. It takes roughly 3 pounds of feed to produce a pound of pork, 

and 2 pounds of feed to produce a pound of broiler meat. Poultry and pork production have expanded so rapidly in 

Brazil for the same reason that pork production in the United States has expanded in the “corn belt”—access to feed 

ingredients. 

In 2010, three-fourths of Brazil’s corn production and one-fourth of its soybeans were consumed as animal feed.b

 The 

poultry and swine industries are the largest consumers of animal feed in Brazil. Brazil’s National Animal Feed 

Industry Association (Sindirações) has estimated that total animal feed production in 2011 will reach 64 million metric 

tons (mt); 31.8 million mt for poultry (up 5 percent from 2010), and 15.7 million mt for swine (up 2 percent from 

2010).c

 

Access to feed influences the location of poultry and swine production within Brazil. Nearly half of the poultry and 

swine in Brazil are raised in the three southernmost states of Paraná, Santa Catarina, and Rio Grande do Sul. These 

three states also accounted for 41 percent of Brazil’s 2010 corn production. 

Brazil’s corn and soybean production are expanding most rapidly in the Center-West region, comprised of the states 

of Mato Grosso, Mato Grosso do Sul, and Goiás, plus the Federal District. Corn production increased almost 

70 percent in the Center-West between 2006 and 2010, and increased 23 percent in the South. Over the period, 

swine production expanded 34 percent in the Center-West and 17 percent in the South. Poultry production grew 

27 percent in the Center-West and 29 percent in the South. 

_____________ a

 Rations differ with stage of development and other grains and protein sources may be substituted. The nutritional 

values of ingredients are commonly compared to those for corn and soybean meal. b

 See chapters 6 and 7 for more information on Brazil’s production and consumption of soybeans and corn. c Brazilian Meat Monitor, “Feed Industry Forecasts Growth of 4.2%,” March 25, 2011, 13.

 29 Industry representative, interview by USITC staff, São Paulo Brazil, August 22, 2011. 
10-9

Exchange Rate 

In countries where Brazil and the United States compete directly, appreciation of the real

has made U.S. pork more price-competitive. 30 In dollar terms, feed costs for swine 

producers in Santa Catarina and Mato Grosso increased 55 percent and 70 percent during 

2006–10, and overall costs increased 64 percent and 60 percent, respectively. In 

comparison, feed costs for U.S. farrow-to-finish swine producers increased 55 percent 

during 2006–10, but total costs increased only 25 percent over the same time period.31 In 

2010, the reported average cost of U.S. farrow-to-finish swine producers, including the 

opportunity cost of the operator’s labor and excluding transportation to slaughter, was 

21 percent above reported cost in Santa Catarina and 27 percent above reported cost in 

Mato Grosso (table 10.5) 

TABLE 10.5 Swine: Average 2010 costs of production per kilogram of weight gain ($ at R$1.76/$)

U.S. national average Santa Catarina Mato Grosso

Total feed costs 0.74 0.82 0.79

Labor 0.23 0.12 0.07

Veterinary and medicine 0.04 0.05 0.03

Other operating costs 0.10 0.14 0.14

Capital recovery, machinery and equipment 0.27 0.05 0.12

Other allocated overhead 0.07 (a

) (a)

 Total costs listed 1.44 1.19 1.14

Source: USDA, ERS, “U.S. Farrow-to-Finish Production Costs” (accessed September 21, 2011); CONAB, “Custo de 

Produção de Suinos para Abate,” 2006 through 2010. 

Note: Labor cost for U.S. producers includes $0.148 for opportunity cost of unpaid labor. This figure was not 

available for Brazilian producers. 

a

Not reported. 

To assess the impact of exchange rates on costs of production, USITC analysts used two 

theoretical exchange rates, R$2.00 per dollar and R$1.50 per dollar. These rates are 

within the range of the highest and lowest exchange rate for 2006–10, but do not 

represent outliers. 32 For this exercise, no changes were assumed to the current cost 

structure, nor were any adjustments made to account for dynamic effects related to 

exchange rate changes. 

Given current cost structures and assuming that transportation adds another 15 percent to 

the costs of production in Brazil, if the real were to depreciate to R$2.00 per dollar, 

swine costs of production would be significantly lower in Santa Catarina and in Mato 

Grosso than in the United States. If the real instead continues to appreciate against the 

dollar and reaches R$1.50 per dollar, production costs would be higher in Santa Catarina 

and Mato Grosso than in the United States. In this exercise, the break-even point between 

total costs for producers in the United States and Santa Catarina is R$1.85 per dollar; for 

Mato Grosso, it is R$1.78 per dollar (table 10.6). 

 30 Industry representatives, interview by USITC staff, Washington, DC, July 7, 2011; ABIPECS, 

Annual Report 2011, 2012, 4. 31 USDA, ERS, “U.S. Farrow-to-Finish Production Costs,” (accessed September 21, 2011). 32 IMF, Exchange Rates database (accessed November 4, 2011). 
10-10

TABLE 10.6 Swine: Average 2010 costs of production using hypothetical R$/$ exchange rates ($/kg)

 United Statesa Brazilb

National Santa Catarina Mato Grosso 

 Actual costs R$2.00/$1 R$1.50/$1 R$2.00/$1 R$1.50/$1

Feed 0.74 0.72 0.96 0.69 0.92

Other variable costsc 0.22 0.27 0.35 0.21 0.28

Fixed costsd 0.34 0.06 0.08 0.10 0.14

 Total 1.30 1.04 1.39 1.00 1.33

Source: USDA, ERS, “U.S. Farrow-to-Finish Production Costs” (accessed September 21, 2011); CONAB, “Custo de 

Produção de Suinos Para Abate,” 2010. 

a

Reported costs in Brazil do not include the opportunity cost of the operator’s labor. Therefore this item was 

subtracted from reported U.S. costs for this comparison. b

Costs are for raising swine and do not include transportation costs, which may add as much as 15 percent to 

costs of production in Mato Grosso. c

Other variable costs include items such as fuel and electricity, veterinary services, and labor. d

Fixed costs include capital recovery of machinery and equipment and allocated overhead. 

Disease 

Competition between U.S. and Brazilian pork exports is limited by sanitary restrictions 

on Brazil’s exports, most notably due to the presence of FMD in some parts of Brazil. 

Markets such as North America, Japan, and Korea were closed to fresh/chilled and frozen 

pork from Brazil in 2006–11 because of Brazil’s FMD status. Canada, Japan, Korea, 

Mexico, and the United States together accounted for just over half the volume and 

61 percent of the value of global imports of fresh/chilled and frozen pork muscle cuts 

(HS 0203) in 2010.33 

FMD was last reported in Brazil in April 2006.34 The state of Santa Catarina in Brazil is 

recognized by the World Animal Health Organization (OIE) as FMD-free without 

vaccination. Five zones within Brazil, encompassing 10 states and the Distrito Federal, 

plus parts of 5 additional states are recognized by the OIE as being FMD-free with 

vaccination, but many countries will not accept pork from regions that are FMD-free with 

vaccination.35 The United States recognizes the State of Santa Catarina as FMD-free but 

considers restrictions on animal or meat imports into the region from infected regions to 

be “less restrictive than would be acceptable for importation into the United States.” 

Therefore the United States allows imports of fresh/chilled and frozen pork from Santa 

Catarina only from facilities that have been certified as eligible “to have its products 

imported into the United States under the Federal Meat Inspection Act.”36 U.S. sanitary 

 33 GTIS, Global Trade Atlas database (accessed November 30, 2011). Cuts of pork are termed muscle 

cuts to distinguish them from edible offal. 34 FMD was last reported in a domesticated animal in April 2006; however, the prevalence in the wild 

population is unknown. Rinderpest has not been reported in Brazil, in either domesticated or wild animal 

populations, since 1921. World Animal Health Organization (OIE) World Animal Health Information 

Database. 35 The states of Acre, Espírito Santo, Goiás, Mato Grosso, Minas Gerais, Paraná, Rio de Janeiro, 

Rondônia, São Paulo, and Sergipe, plus the Distrito Federal and parts of the states of Amazonas, Bahia, Mato 

Grosso do Sul, Pará, and Tocatins, are recognized by the OIE as FMD-free with vaccination. OIE, “List of 

FMD-Free Members,” May 2011. 36 U.S. Code of Federal Regulations, Title 9, § 94.11. As of January 17, 2012, six facilities in Brazil 

had been certified to export such pork to the United States. USDA, FSIS, “Brazil: Eligible Plants Certified to 

Export Meat to the United States,” January 17, 2012. 
10-11

regulations and those of many other countries do allow imports of cooked and processed 

pork. 

Japan reportedly sent a team to Brazil to audit swine production facilities on August 28–

September 3, 2011. Producers in Brazil hope that the results of the audit will allay 

Japanese regulators’ worries about FMD in Brazil’s commercial pork production and lead 

to the opening of the Japanese market to pork from Brazil.37 Korea is also reportedly 

considering allowing imports of pork from Santa Catarina, and will reportedly issue a 

statement on its risk analysis of pork imports from Santa Catarina in the near future.38 

Japan and Korea are the number one and the number five global destination markets for 

pork. Further, the unit value of pork exports to Japan is among the highest in the world. 

Together, the two countries account for 31 percent of the volume and 46 percent of the 

value of reported global imports under HS 0203 in 2011. Opening either of these markets, 

particularly Japan, to exports of pork from Santa Catarina would significantly increase 

Brazil’s potential export opportunities for fresh/chilled and frozen pork significantly and 

increase competition between U.S. and Brazilian pork producers. 

Transportation Infrastructure 

Brazil’s global competitiveness in the pork sector is limited by its transportation 

infrastructure.39 Transportation to a slaughter plant can reportedly add 15 percent to the 

cost of swine raised in the state of Mato Grosso.40 Transportation from Mato Grosso to 

the port of Paranaguá in the state of Paraná reportedly adds another 12 percent. 41

Transportation costs in Brazil are significantly higher than in the United States. The cost 

of refrigerated transportation in São Paulo, for instance, is reportedly 30 percent higher 

than in the United States.42 Improvements in Brazil’s transportation infrastructure would 

be expected to increase the competitiveness of Brazil’s pork exports in third-country 

markets. 

Government Support 

As of May 21, 2011, Brazil’s pork producers are exempt from the Program for Social 

Integration (PIS) and the federal contribution (Contribuição para o Financiamento da 

Seguridade Social or “COFINS”) taxes, as are providers of swine feed and other inputs. 

This is expected to primarily benefit producers selling in Brazil’s domestic market, 

because exporters can already deduct from their overall tax liabilities any PIS and 

COFINS taxes paid on exported pork.43 But tax breaks such as these lower the production 

costs of Brazil’s pork industry and indirectly lower the cost structure of pork exporters. 

 37 Brazilian Meat Monitor, “Santa Catarina to Be Visited by Japanese Mission,” August 19, 2011, 16. 38 Brazilian Meat Monitor, “South Korean Government to Give Answer on Pork Imports,” October 28, 

2011, 17. 39 Consoli et al., “Mapping and Quantification of the Meat Chain in Brazil,” November 2009, 10; 

industry representative, interview by USITC staff, Mato Grosso, Brazil, August 31, 2011. 40 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 31, 2011. 41 Embrapa, Economic Aspects of the Agricultural Production in Brazil, December 13, 2010, 10. 42 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011. 43 Brazilian Meat Monitor, “Tax Exemption Reaches Producers of Pork,” June 23, 2011, 1–2. 
10-12

Competitive Position with the United States 

Both Brazil and the United States are among the lowest-cost producers of swine and 

pork, and both countries are major pork exporters. Competition between U.S. and 

Brazilian pork in export markets is limited by Brazil’s disease status; Brazilian pork 

producers were not eligible to export to North America, Japan, or Korea over 2006–11.44

If restrictions on Brazil’s pork exports were eliminated, either for the entire country, or 

for exports from Santa Catarina, competition between U.S. and Brazilian pork would rise 

substantially. The United States and Brazil do compete in the Russia and Hong Kong 

markets, both of which are major U.S. export markets, and as discussed above, some 

producers in Brazil have reportedly become eligible to export pork to China. 

Brazil is not eligible to export pork to the EU-27 because of the widespread use in Brazil 

of the feed additive ractopamine, an additive that promotes gain in lean meat over fat. 

Brazil reportedly does not have a system in place that can certify that swine were raised 

without ractopamine.45 Ractopamine is also widely used in the United States (and many 

other countries). However, pork produced in the United States is eligible for export to the 

EU-27 as long as swine are produced under a documented system to ensure that no 

ractopamine was fed to the animal.46 Approximately half of the swine produced in the 

United States are fed ractopamine.47 

Most pork exports by both Brazil and the United States are frozen pork cuts in the HS 

subheading 0203.29, “Meat of swine, not elsewhere specified or included, frozen.” In 

2011, such exports accounted for 74 percent of Brazil’s total pork exports, on a volume 

basis. This is a residual category, and the type of pork and the quality can vary 

significantly. Brazil’s exports to Russia and Ukraine under this subheading are likely to 

be loin cuts, while its exports to Asian markets are more likely to be trim and lowervalued cuts. 48 This difference is likely responsible for the difference in unit values 

observed for Brazil’s exports to Russia compared to its exports to markets in Asia and 

Africa. 

U.S. exports to markets in Asia are also typically of cuts for which demand is lower in 

Western countries.49 U.S. pork exports are unlikely to be loin cuts, as demand for these 

cuts is high in the U.S. domestic market.50 Therefore, U.S. products exported to markets 

in Asia are likely to be similar in composition to products exported from Brazil, but 

Brazil’s exports to markets like Russia and Ukraine are likely to be of different cuts than 

U.S. exports to these markets. 

 44 Brazil requires the inspection of individual U.S. plants in order to export pork to Brazil. This process 

is costly, and to date no plants have been approved. Brazil also does not allow imports of fresh/chilled pork 

from the United States citing the risk of trichinosis. USTR, 2011 Report on Sanitary and Phytosanitary 

Measures, 32; USDA, FSIS, “Export Requirements for Brazil,” 

http://www.fsis.usda.gov/Regulations_&_Policies/Brazil_Requirements/index.asp, accessed March 14, 2012. 45 PigProgress.net, “EU Food Watchdog: Pork Imports from Brazil,” August 23, 2011. 46 USDA, FSIS, “Program for Certifying Pork Intended for Export,” accessed November 9, 2011. 47 Ortega and Wang, “Opportunities for U.S. Pork in China,” April 2009, 3. 48 The loin is the area on both sides of the backbone and is the source of the most tender pork. 

49 Ortega and Wang, “Opportunities for U.S. Pork in China,” April 2009, 1. 50 Industry representative, interview by USITC staff, Washington, DC, July 7, 2011. 
10-13

Key Export Markets 

Exports account for a significant share of Brazil’s pork production, approximately 

20 percent in each year 2006–11. Brazil exported pork to 62 countries in 2011, but the 

top 5 markets—Russia, Hong Kong, Ukraine, Argentina, and Angola—accounted for 

78 percent of exports on a value basis (table 10.7).51

TABLE 10.7 Brazil’s pork exports to selected markets, 2006–11

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

 Million $ Percent

Russia 618 666 739 566 649 394 –9

Hong Kong 95 167 232 221 197 320 28

Ukraine 75 94 136 107 105 183 19

Argentina 34 51 63 58 97 126 30

Angola 11 22 42 53 45 77 47

All other 189 210 235 200 228 317 11

 Total 1,022 1,209 1,448 1,205 1,322 1,416 7

Source: GTIS, Global Trade Atlas database (accessed February 6, 2012).

Russia 

Export Volume 

Russia is the world’s second-largest global export market for pork, after Japan. In each 

year 2006–08, exports to Russia accounted for more than half the value of Brazil’s total 

pork exports.52 Brazil’s pork producers are aware of the risks in depending so heavily on 

one export market.53 Some pork producers are reportedly being forced into bankruptcy 

due to reductions in sales to the Russian market.54 Brazilian exporters have continued to 

open and develop new markets and, as a result, exports to Russia have generally declined 

as a share of Brazil’s total pork exports, from 60 percent by value in 2006 to 28 percent 

in 2011.55 Despite recent advances in pork production, Russia depended on imports for 

nearly one-third of its pork consumption in 2011 (table 10.8). Brazil was Russia’s 

second-largest source of imported pork (after the EU-27) in every year 2006–10 

(table 10.9). 

 51 GTIS, Global Trade Atlas database (accessed February 6, 2012). 52 GTIS, Global Trade Atlas database (accessed November 30, 2011). On a volume basis, exports to 

Russia accounted for between 46 percent and 48 percent of Brazil’s total pork exports. 53 Industry representative, interview by USITC staff, São Paulo, Brazil, August 23, 2011; ABIPECS, 

Annual Report 2008, 2009, 2. 54 USDA, FAS, Brazil: Annual Livestock Report 2011, August 16, 2011, 10. 55 Pig333.com, “Pig Production in Brazil,” August 20, 2009; GTIS, Global Trade Atlas database 

(accessed November 30, 2011). 
10-14

TABLE 10.8 Russia: Pork production, supply, and distribution, 2006–11

2006 2007 2008 2009 2010 2011 

Average annual 

change 2006–11

Percent

Production (1,000 mt CWE)a 1,444 1,640 1,736 1,844 1,920 1,965 6

Imports (1,000 mt CWE) 835 894 1,053 845 854 930 2

Exports (1,000 mt CWE) 0 0 0 1 1 1 (

b

)

Total supply (1,000 mt CWE) 2,279 2,534 2,789 2,689 2,800 2,895 5

Domestic consumption (1,000 mt CWE) 2,279 2,534 2,789 2,688 2,799 2,894 5

Per capita consumption (kg) 16.0 17.9 19.8 19.2 20.1 20.9 5

Source: USDA, FAS, PSD Online (accessed February 6, 2012). 

a

Carcass weight equivalent. 

b

Not applicable. 

TABLE 10.9 Russia: Pork imports, by supplier, 2006–11 

 2006 2007 2008 2009 2010 2011 

Average annual 

change 2006–11

 Million $ Percent

EU-27 747 799 1,060 913 1,086 1,377 13

Brazil 535 706 701 780 729 441 –4

Canada 158 172 273 114 186 349 17

United States 166 210 481 336 191 196 3

All other 35 6 21 9 10 93 21

 Total 1,641 1,893 2,536 2,152 2,202 2,455 8

 Metric tons 

EU-27 432,386 417,944 465,748 386,483 444,200 503,362 3

Brazil 238,187 289,725 243,591 260,158 241,242 144,595 –10

Canada 82,002 84,102 112,941 50,841 74,286 120,194 8

United States 85,485 100,890 194,237 136,390 68,574 65,012 –5

All other 18,169 3,019 7,320 3,373 4,000 22,273 4

 Total 856,229 895,680 1,023,837 837,245 832,302 855,3536 0

Source: GTIS, Global Trade Atlas database (accessed March 30, 2012). 

Notes: Full-year 2011 data are not yet available. Totals may not add due to rounding. 

Brazil’s Export Composition 

In 2011, frozen boneless muscle cuts of pork accounted for 82 percent of Brazil’s pork 

exports to Russia by value. The average unit value can provide some information on the 

relative quality of the product; for Brazil’s exports to Russia in this subheading, it was 

$3.44 per kg. This was slightly lower than the unit value of such exports to Argentina, but 

substantially higher than the unit value of such exports to Hong Kong and Angola. 

Exports of frozen carcasses and half-carcasses also account for a substantial share of 

exports; they made up 14 percent of Brazil’s total pork exports to Russia in 2011. 

Exports of fresh/chilled pork (generally seen as more likely to be destined for the hotel 

and restaurant segment) accounted for less than one-half of 1 percent of Brazil’s exports 

to Russia in 2010 and 2011. In contrast, exports of fresh/chilled pork accounted for 

6 percent of pork exports to Russia in 2010 from the EU-27, Russia’s largest imported 

pork supplier, and 7 percent of such exports in the first 10 months of 2011. Exports of 

frozen boneless muscle cuts of pork accounted for 74 percent of Brazil’s exports, 

59 percent of U.S. exports, and 62 percent of EU-27 pork exports to Russia. Edible pork 

offal accounted for less than 1 percent of Brazil’s pork exports to Russia in 2010 and 
10-15

2011. Edible pork offal accounted for 32 percent of both EU-27 and U.S. pork exports to 

Russia in 2010, on a volume basis. Unit values for edible offal are typically much lower 

than the unit values for exports of pork muscle cuts.56 

Russia’s Import Restrictions 

Russia maintains a tariff-rate quota (TRQ) on pork imports (table 10.10). In 2011, 

within-quota imports of pork from developed countries were assessed a duty of 

15 percent of the customs value, but not less than €0.25 per kg, while over-quota imports 

were assessed a duty of 75 percent, but not less than €1.50 per kg.57 The duty charged on 

imports from a developing country such as Brazil are 75 percent of the normal rate, for 

both within-quota and over-quota shipments. Russia has set a goal of achieving 

self-sufficiency in pork production, and has increased support for its domestic pork 

producers. As Russia’s domestic pork production has increased, the within-quota TRQ 

volumes have decreased.58 In 2009, the U.S. allocation was doubled, and in 2010, the 

U.S. allocation was reduced from 100,000 mt to 57,500 mt. Unlike the EU-27 and the 

United States, Brazil does not have a country-specific quota volume. Instead, Russia’s 

imports of pork from Brazil either enter under the “other countries” quota or face 

over-quota tariffs. Brazil’s pork exports to Russia significantly exceeded the “other 

country” quota volume in each year of the period. 

TABLE 10.10 Russia: Within-quota TRQ volumes for pork, 2006–11 (1,000 mt)

2006 2007 2008 2009 2010 2011

Pork: fresh/chilled, frozen 476.1 484.8 493.5 531.9 472.1 472.1

 European Union 240.5 244.9 249.3 253.4 225.0 225.0

 United States 54.8 49.0 49.8 100.0 57.5 57.5

 Paraguay 1.0 1.0 1.0 1.0 0 0

 All other 179.8 189.9 193.4 177.5 189.6 189.6

Pork: trimmings 0 0 0 0 27.9 27.9

Sources: USDA, FAS, Russian Federation Livestock and Products Semi-annual, September 21, 2010, table 14; 

USDA, FAS, Russia Announces 2011 TRQ Quantities, December 27, 2010, 3. 

Russia has also recently restricted imports of pork from Brazil for sanitary reasons. In 

June 2010, Russia’s Federal Office for Veterinary and Sanitary Control removed 

87 packing plants in Brazil from the list of exporters eligible to ship to Russia. In August, 

a further 37 meat packing plants were determined to be ineligible.59 In September 2011, 

Russia’s veterinary service, Rosselkhozadzor, announced plans to reinspect Brazil’s 

processors in the fourth quarter 2011 before deciding whether to extend the ban. 60

Because exports to Russia account for such a large share of Brazil’s total pork exports, 

 56 GTIS, Global Trade Atlas database (accessed March 30, 2012). 

57 With the exception of over-quota imports of frozen boneless shoulders and cuts that were charged a 

duty of 75 percent but not less than €1.00 per kg, or 56.25 percent but not less than €0.75 per kg if from a 

developing country. There is no TRQ on edible offal. Russia’s tariffs on most edible pork offal are 15 percent 

but not less than €0.15 per kg. Tariff data from the International Trade Centre, Market Access Map. 58 Meatingplace.com, “Russia Cuts 2010 U.S. Pork, Poultry Import Quotas,” December 21, 2009; 

MeatRussia.com, “Gordeev: Meat Provision is the Main Food Question in Russia,” October 27, 2008. 59 Meatingplace.com, “Russian Trade Embargo on Brazil Extended,” August 2, 2011. 60 MeatingPlace.com, “Talks Resurface between Brazil, Russia,” September 7, 2011. 
10-16

when Russia banned imports from many of Brazil’s pork producers in 2010, prices for 

pork in Brazil’s domestic market declined significantly.61

Competition with the United States 

Russia is also a major export market for U.S. pork. As noted, the United States has a 

country-specific quota allocation while Brazil’s pork exports to Russia are under the 

“other countries” quota allocation. Throughout most of 2006–11, U.S. pork exports to 

Russia exceeded the U.S. quota allocation. Brazil’s exports exceeded the “other country” 

quota allocation in every year. Brazil’s over-quota shipments benefit from Brazil’s status 

as a developing country compared to U.S. over-quota pork exports. As Russia decreases 

the volumes of its within-quota pork imports, Brazil’s developing-country status makes 

its pork exports increasingly price-competitive with those from the United States. 

Hong Kong and China 

Export Volume 

Hong Kong is a major pork importer and a major export market for Brazil (table 10.11). 

The four largest exporters of pork to Hong Kong by value in 2011 were the EU-27, 

Brazil, China, and United States (table 10.12). A significant fraction of Hong Kong’s 

imports are reportedly re-exported to China. Re-exports reportedly account for 28 percent 

of all Hong Kong pork muscle cut imports and 75 percent of edible offal imports and 

China is reportedly the largest re-export market for these products.62

TABLE 10.11 Hong Kong: Pork production, supply, and distribution, 2006–11

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

Percent

Production (1,000 mt CWE) 142 127 110 117 119 114 –4

Imports (1,000 mt CWE) 277 302 346 369 347 360 5

Total supply (1,000 mt CWE) 419 429 456 486 466 474 2

Domestic consumption (1,000 mt CWE) 419 429 456 486 466 474 2

Per capita consumption (kg) 60.4 61.5 65.0 68.9 65.9 66.5 2

Source: USDA, FAS, PSD Online (accessed February 6, 2012).

 

 61 Industry representative, interview by USITC staff, Mato Grosso, Brazil, August 31, 2011. See 

chapter 11 for an estimate of the impact of nontariff measures (NTMs), including sanitary measures, on pork 

exports. 62 USDA, FAS, Hong Kong: Livestock and Products Annual, August 24, 2011, 2, 9–10. 
10-17

TABLE 10.12 Hong Kong: Pork imports, by supplier, 2006–11 

 2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

 Million $ Percent

EU-27 174 324 741 681 715 1,047 43

Brazil 110 174 264 254 237 361 27

China 212 227 249 289 326 338 10

United States 60 99 368 315 279 234 31

Canada 14 30 119 100 96 54 31

All other 40 61 85 73 70 97 19

 Total 610 916 1,827 1,712 1,722 2,131 28

Source: GTIS, Global Trade Atlas database (accessed February 6, 2012). 

Note: Totals may not add due to rounding. 

China is the world’s largest producer and consumer of pork. A severe disease outbreak 

devastated its swine herd in 2007, but in response to high prices, both China’s pork 

imports and its domestic swine production have increased.63 China reported no imports of 

pork from Brazil in 2010, and Brazil reported pork exports to China of just 54 mt that 

year. U.S. pork exports to China in 2010 totaled 108,761 mt. 

Brazil’s Export Composition 

More than half of Brazil’s pork exports to Hong Kong are of frozen boneless muscle cuts 

of pork. Exports of bone-in frozen hams, shoulders, etc. also account for a substantial 

share of exports—6 percent of Brazil’s total pork exports to Hong Kong in 2011. The 

average unit value of Brazil’s exports of frozen boneless pork to Hong Kong in 2011 was 

$2.83 per kg, lower than the unit value of its exports to Russia ($3.44 per kg) and Ukraine 

(3.04 per kg). This difference may reflect a difference in the composition of exports. 

China’s consumers reportedly have relatively higher demand for pork cuts that are not in 

much demand in Western markets, including cuts with a greater share of fat, such as pork 

belly.64 Also, Brazil’s pork exports to Asian markets reportedly include a large share of 

trim.65 Approximately 27 percent of Brazil’s pork exports to Hong Kong in 2011 were of 

edible offal.66 

Hong Kong’s Import Restrictions 

Hong Kong has zero duties on imports of all pork. China maintains MFN duties of 

20 percent ad valorem (as a percentage of value) on fresh pork muscle cuts and edible 

offal, 12 percent ad valorem on frozen pork muscle cuts and edible offal, 25 percent ad 

valorem on salted or dried pork products, and 15 percent ad valorem on prepared or 

preserved pork products, such as cooked hams or other cooked products. In addition, like 

the EU-27, China bans imports of pork from swine that were fed ractopamine, a measure 

that affects both Brazil and the United States. 

 63 USDA, FAS, China: Livestock and Products Annual, September 2, 2011, 6, 8. 64 Ortega and Wang, “Opportunities for U.S. Pork in China,” April 2009, 1. 65 Industry representative, interview by USITC staff, Washington, DC, July 7, 2011. 

66 Edible offal includes internal organs such as liver and kidney (variety meats) plus other products 

such as tails, meat processed from the head, casings (intestines), and feet. 
10-18

Competition with the United States 

Currency appreciation in Brazil and other major pork producers, relative to the U.S. 

dollar, has favored U.S. pork exports to Hong Kong. Traditional cuts of pork differ by 

country, and as U.S. pork exports to Hong Kong have increased, more U.S. producers 

have offered pork cuts tailored to the Chinese market. This also has benefited U.S. 

exports.67 However, some cuts typically produced in Brazil more closely match those 

traditionally consumed in China.68 

Sixty-two percent of the volume of U.S. exports of pork to Hong Kong in 2011 was of 

edible offal, compared to 27 percent of Brazil’s exports to Hong Kong. Edible offal 

reportedly accounts for the majority of pork re-exports from Hong Kong to mainland 

China.69 U.S. pork exporters reportedly have an advantage over other exporters in being 

able to offer greater volumes of offal in a single order due to the scale of U.S. 

production.70 

Since Russia banned imports from many producers in Brazil, these producers have 

reportedly begun offering more pork to Hong Kong at lower prices than previously.71

Additionally, as noted earlier, three Brazilian pork producers have reportedly recently 

been approved to export to China, although to date USITC staff cannot confirm that any 

shipments have taken place.72 If these producers and others in Brazil do begin direct 

exports to mainland China, this would be expected to increase competition between U.S. 

and Brazilian pork in the region. 

Ukraine 

More than half of Ukraine’s domestic pork production is by small household farms, 

although the share of such production is falling.73 Before Ukraine’s accession to the 

World Trade Organization (WTO) in 2008, inefficient domestic producers were largely 

protected from competition from imports. Ukraine’s domestic pork demand is currently 

strong, and a decline in feed prices is leading to greater investments in domestic 

production. High pork prices are also spurring imports from multiple sources, although 

imports have declined in volume in each of the last three years (table 10.13).74 

Export Volume 

Brazil’s pork exports to Ukraine increased in both volume and value during 2006–11. In 

2011, Ukraine was Brazil’s third-largest export market for pork. Brazil was the first- or 

second-largest supplier of pork to Ukraine throughout 2006–10 (table 10.14). In May

 67 USDA, FAS, Hong Kong: Livestock and Products Annual, August 24, 2011, 2. 68 U.S. Meat Export Federation, “Greater China Pork,” October 2008, 2. 

69 USDA, FAS, Hong Kong: Livestock and Products Annual, August 24, 2011, 9–10. 70 USDA, FAS, Hong Kong: Livestock and Products Annual, August 24, 2011, 9. 71 Ibid. 

72 Brazilian Meat Monitor, “Three Companies Get Permission to Sell Pork to China,” June 3, 2011, 17. 73 USDA, FAS, Ukraine: Livestock and Products, September 14, 2009, 4; USDA, FAS, Ukraine: 

Livestock and Products, October 14, 2010, 2. 74 USDA, FAS, Ukraine: Livestock and Products Voluntary Annual Report, September 8, 2011, 1–2. 
10-19

TABLE 10.13 Ukraine: Pork production, supply, and distribution, 2006–11

2006 2007 2008 2009 2010 2011 

Average annual

change 2006–11

Percent

Production (1,000 mt CWE) 526 635 590 527 631 650 4

Imports (1,000 mt CWE) 62 82 238 186 146 90 8

Exports (1,000 mt CWE) 3 2 0 0 1 16 40

Total supply (1,000 mt CWE) 610 739 850 735 799 762 5

Domestic consumption (1,000 mt CWE) 585 715 828 713 776 724 4

Per capita consumption (kg) 12.5 15.4 18.0 15.6 17.1 16.0 5

Source: USDA, FAS, PSD Online (accessed February 6, 2012).

TABLE 10.14 Ukraine: Pork imports, by supplier, 2006–10 

 2006 2007 2008 2009 2010 

Average annual 

change 2006–10

 Million $ Percent

EU-27 7 2 343 155 137 113

Brazil 66 94 87 112 72 2

United States 0 0 11 19 13 (a

)

Canada (b

) 0 6 12 8 211

All other 2 2 3 3 7 49

 Total 75 98 449 300 236 34

Source: GTIS, Global Trade Atlas database (accessed November 30, 2011). 

Notes: Full-year 2011 data on Ukraine’s pork imports are not yet available. Totals may not add due to rounding. 

a

Not applicable. 

b

Less than $500,000. 

2008, Ukraine lowered import tariffs on pork and liberalized its sanitary requirements 

when it acceded to the WTO.75 Since accession, Ukraine’s pork imports have grown 

substantially. Imports have increasingly been from the EU-27 and to some extent the 

United States, and the share of imports from Brazil has declined. 

Brazil’s Export Composition 

The composition of Brazil’s pork exports to Ukraine is similar to its exports to Russia. 

The largest share is frozen boneless muscle cuts of pork, while exports of frozen 

carcasses and half-carcasses also account for a substantial share of exports—7 percent in 

2011. Edible offal accounted for less than 1 percent of exports. The average unit value of 

Brazil’s boneless pork exports to Ukraine in 2010 was slightly lower than for exports to 

Russia, at $3.06 per kg. 

Ukraine’s Import Restrictions 

As part of its WTO accession package, Ukraine lowered import tariffs on pork and 

reduced sanitary restrictions. 76 Nonetheless, some problems are said to remain. The 

Ukraine State Customs Service (SCS) reportedly sometimes assigns customs values to 

U.S. imports that are higher than the values declared in import documentation, and the 

 75 USDA, FAS, Ukraine: Livestock and Products, September 14, 2009, 7. 76 Ibid. 
10-20

State Committee for Veterinary Medicine has reportedly limited imports by delaying 

import permits.77 Ukraine’s MFN tariffs on pork are reported in the following tabulation. 

Ukraine’s MFN Pork Tariffs, 2011 

 Percent 

Fresh/chilled muscle cuts 12 

Frozen muscle cuts 10 

Fresh/chilled edible offal 15 

Frozen edible offal 10 

Prepared hams, shoulders 20 

Other prepared pork products 10 

Competition with the United States 

Before 2008, almost all of Ukraine’s pork imports were from Brazil. The United States 

began exporting pork to Ukraine in 2008 when Ukraine joined the WTO. Consumers in 

Ukraine have a preference for fresh/chilled pork. Most imports are of frozen pork and are 

largely used in the production of processed products. Most of Ukraine’s imported frozen 

pork is trimmings.78 Both Brazil and the United States export mostly frozen pork to 

Ukraine. In contrast, pork exports from the EU-27 include large shares of edible offal and 

fresh/chilled pork.79 In 2010, imports from the EU-27 gained market share in Ukraine 

slightly, at the expense of both Brazil and the United States. 

Argentina 

Export Volume 

Per capita pork consumption in Argentina increased more than 10 percent during 2006–

11, with most of the increase attributable to imports (table 10.15). As a member of 

Mercosul, Brazil faces zero tariffs on its pork exports to Argentina and has captured the 

majority of Argentina’s market for imported pork (table 10.16). Argentinian imports of 

pork more than tripled by value during the 2006–11 and Brazil accounted for 

approximately 82 percent of the total growth during that period. 

TABLE 10.15 Argentina: Pork production, supply, and distribution, 2006–11

2006 2007 2008 2009 2010 2011 

Average annual 

change 2006–11

Percent

Production (1,000 mt CWE) 210 215 220 225 218 215 0

Imports (1,000 mt CWE) 24 33 31 35 48 60 20

Exports (1,000 mt CWE) 1 1 2 2 1 1 0

Total supply (1,000 mt CWE) 234 248 251 260 266 275 3

Domestic consumption (1,000 mt CWE) 233 247 249 258 265 274 3

Per capita consumption (kg) 5.9 6.2 6.2 6.3 6.7 6.6 2

Source: USDA, FAS, PSD Online (accessed February 6, 2012).

 77 USTR, 2011 National Trade Estimate Report on Foreign Trade Barriers, 363; USDA, FAS, 

Ukraine: Livestock and Products Voluntary Annual Report, September 8, 2011, 7. 78 USDA, FAS, Ukraine: Livestock and Products Voluntary Annual Report, September 8, 2011, 7. 79 GTIS, Global Trade Atlas database (accessed November 30, 2011). 
10-21

TABLE 10.16 Argentina: Pork imports, by supplier, 2006–11 

 2006 2007 2008 2009 2010 2011 

Average annual

change 2006–10

 Million $ Percent

Brazil 37 58 72 65 106 135 30

Chile 6 6 8 7 19 21 29

EU-27 2 3 6 6 11 10 38

All other (a

) (a) (a) (a) (a) (a) (b)

 Total 45 67 86 78 136 165 30

Source: GTIS, Global Trade Atlas database (accessed April 18, 2012). 

Note: Totals may not add due to rounding. 

a

Less than $500,000. 

b

Not applicable. 

Brazil’s total pork exports to Argentina in 2011 consisted mostly of frozen boneless 

muscle cuts of pork. The average unit value of such pork exports to Argentina in 2010 

was $3.24 per kg. Brazil’s pork exports to Argentina also include processed and prepared 

products. These products accounted for 9 percent of Brazil’s pork exports to Argentina in 

2011. 

Import Restrictions 

Under Mercosul, imports of pork from Brazil enter Argentina duty free. Imports from 

outside the region, including those from the United States, face Mercosul tariffs of 

10 percent on most pork products and 16 percent on prepared or preserved pork products 

such as cooked hams. Argentina reportedly applies reference pricing to most imports, 

rather than basing tariffs on the declared value of imports, but it is not known if this 

practice is applied to imports of pork.80 

Competition with the United States 

The United States exports very little pork to Argentina, and the volume of exports has 

declined from over 17 mt in 2006 to just over 1 mt in 2010 and zero in 2011. In 2010, all 

of U.S. pork exports to Argentina were of frozen boneless muscle cuts of pork. The 

average unit value of U.S. pork exports to Argentina in 2010 was 12 percent above the 

unit value of Brazil’s exports to Argentina, approximately equal to the preferential tariff 

treatment. U.S. exporters are unlikely to gain market share from those in Brazil unless 

Argentina reduces or eliminates the duty-rate advantage available to Brazilian exporters. 

Angola 

Export Volume 

Angola’s consumption of pork rose by more than one-third in 2006–11, with almost all 

the increase attributable to imports (table 10.17). Angola is Brazil’s fourth-largest pork 

 80 USTR, 2011 National Trade Estimate Report on Foreign Trade Barriers, 2011, 21. Reference 

pricing is the practice of basing tariffs on a (usually higher) “reference price” rather than on the actual invoice 

price of a shipment. 
10-22

TABLE 10.17 Angola: Pork production, supply, and distribution, 2006–11

Item 2006 2007 2008 2009 2010 2011 

Average annual 

change 2006–11

Percent

Production (1,000 mt, CWE) 30 31 32 32 33 32 1

Imports (1,000 mt CWE) 36 45 55 61 58 70 14

Domestic consumption (1,000 mt CWE) 66 76 87 93 91 102 9

Per capita consumption (kg) 5.5 6.2 6.9 7.3 7.0 7.6 7

Source: USDA, FAS, PSD Online (accessed February 6, 2012). 

export market by volume. It is also Brazil’s fastest-growing pork market, having 

expanded 600 percent in value during 2006–11. Brazil and Angola share cultural ties. 

Both are former colonies of Portugal, and Portuguese is the official language of both 

countries. They also share culinary traditions such as feijoada, a stew of pork and beans. 

Angola’s economy is heavily dependent on oil, which accounts for 85 percent of its GDP. 

Increases in oil prices in recent years have fueled economic expansion. With the growth 

of the economy, consumption of pork has grown by more than one-third since 2006, 

largely through increased imports. Imports rose 66 percent in quantity and nearly doubled 

in value during 2006–10 (table 10.18). 

TABLE 10.18 Angola: Pork imports, by supplier, 2006–10a

 2006 2007 2008 2009 2010 

Average annual 

change 2006–10

 Million $ Percent

EU-27 35 46 57 56 52 11

Brazil 11 22 42 53 45 41

United States 1 1 3 2 2 21

Canada 1 1 5 2 2 25

Chile 0 (b

) 1 2 1 (c)

All other 4 2 1 1 1 –28

 Total 52 73 110 115 103 19

Source: GTIS, Global Trade Atlas database (accessed November 30, 2011). 

Notes: Full-year 2011 data on global pork exports to Angola are not yet available. Totals may not add due to 

rounding. 

a

Data represent global exports to Angola from its top suppliers. 

b

Less than $500,000. 

c

Not applicable. 

Export Composition 

Brazil’s exports to Angola are predominantly frozen boneless muscle cuts of pork 

(HS 0203.29). Almost all the rest are frozen edible offal (HS 0206.49). Average unit 

values of goods exported under this subheading to Angola are much lower than unit 

values of Brazil’s exports of such goods to any of its other major markets for pork. In 

2011, the unit value of Brazil’s exports of frozen boneless pork to Angola was $2.36 per 

kg.81 

 81 GTIS, Global Trade Atlas database (accessed November 30, 2011). 
10-23

Import Restrictions 

Angola maintains tariffs of 10 percent ad valorem on imports of pork meat and edible 

offal, and 15 percent on imports of processed pork products.82 Exports of all goods to 

Angola are potentially impacted by widespread reported corruption in Angola and 

deficiencies in infrastructure. 83 USITC staff have not identified any major sanitary 

barriers or technical barriers to trade facing U.S. exports of pork to Angola. 

Competition with the United States 

Brazil’s pork exports to Angola in 2011 were made up of 70 percent frozen boneless 

muscle cuts of pork, 3 percent bone-in frozen pork, and 23 percent frozen edible offal 

other than livers by volume. The composition of U.S. pork exports to Angola in 2011 was 

somewhat different: 14 percent frozen boneless pork, 65 percent bone-in frozen pork, and 

21 percent frozen edible offal other than livers. The average unit values for Brazil’s 2011 

exports of bone-in and boneless pork of $1.50 and $2.36 per kg, respectively, were lower 

than the average unit values of U.S. exports at $1.92 and $2.60. The average unit values 

of exports to Angola from both Brazil and the United States in 2010 were lower than the 

average unit values of similar products to other major trading partners, perhaps indicating 

a lower quality of product exported to Angola from both countries. Brazil’s cultural and 

linguistic ties to Angola give Brazilian pork a competitive advantage in this market. 

 

 82 WTO Tariff Information database. 

83 USTR, 2011 National Trade Estimate Report on Foreign Trade Barriers, 2011, 10–11. 
10-24

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Associação Brasileira da Indústria Produtora e Exportadora de Carne Suina (ABIPECS). Annual Report 

2006, n.d. 

———. Annual Report 2008, n.d. 

———. Annual Report 2009, n.d. 

———. Annual Report 2010, n.d. 

———. Annual Report 2011, n.d. 

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(assessed February 8, 2012). 

Brazilian Meat Monitor. “Brazilian Cattle Industry Suffering from High Feed Costs,” August 26, 2011. 

———. “Feed Industry Forecasts Growth of 4.2%,” March 25, 2011, 13. 

———. “Santa Catarina to Be Visited by Japanese Mission,” August 19, 2011, 16. 

———. “South Korean Government to Give Answer on Pork Imports,” October 28, 2011, 17. 

———. “Tax Exemption Reaches Producers of Pork and Poultry Chains, but Profits Remain a Challenge,” 

June 23, 2011, 1-2. 

———. “Three Companies get Permission to Sell Pork to China,” June 3, 2011, 17. 

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costs of pigs to be slaughtered], 2006 through 2010. 

Consoli, Matheus, Maria Stella Mello Saab, Vinicius Gustavo Trombin, Larissa Borges de Souza, and 

Maria Gabriela de Oliveira Tononi. “Mapping and Quantification of the Meat Chain in Brazil.” 

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Paulo, Brazil, November 26–28, 2009. 

http://www.pensaconference.org/vii_pensa_conference/flash/pdf/01/AGN%2044%20aprov.pdf. 

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Meatingplace.com. “Russia Cuts 2010 U.S. Pork, Poultry Import Quotas,” December 21, 2009. 

———. “Russian Trade Embargo on Brazil Extended to 37 More Plants,” August 2, 2011. 

———. “Talks Resurface between Brazil, Russia on Meat Trade Embargo,” September 7, 2011. 

———. “U.S. Agrees to Import Brazilian Pork: Authorizes Santa Catarina State,” January 11, 2012. 
10-25

MeatRussia.com. “Gordeev: Meat Provision Is the Main Food Question in Russia,” October 27, 2008. 

Neves, Marcos Fava, Maria Stella Melo Saab, and Lucas Sciencia do Prado. “Analyzing Some 

Relationships between the Segments of the Pork Chain in Brazil.” In 19th Annual World Food 

and Agribusiness Forum and Symposium: Global Challenges, Local Solutions. International Food 

and Agribusiness Management Association, 2009. 

Ortega, David L., and H. Holly Wang. “Opportunities for U.S. Pork in China and Implications for U.S. 

Hog Producers.” EC-758-W. Purdue University Cooperative Extension Service, April 2009. 

Pig333.com. “Pig Production in Brazil,” August 20, 2009. 

PigProgress.net. “EU Food Watchdog: Pork Imports from Brazil Not Likely Soon,” August 23, 2011. 

Rasmussen, Jacob. “Costs in International Pig Production: 2004.” Danish Pig Production and DMA 

Report No. 29. Copenhagen: Association of Danish Pig Producers, 2006. 

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d=d99aa2f7-6a73-4c72-adf8-2b894765ecc1. 

TheMeatSite.com. “Brazil Foods Ships Pork to China,” March 1, 2012. 

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.pdf. 

U.S. Department of Agriculture (USDA). Economic Research Service (ERS). “Farrow-to-finish 

Production Costs and Returns per Hundredweight Gain, 2004–2010.” 

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Products Annual, by João F. Silva. GAIN Report no. BR0715, August 16, 2011. 

———. China, Peoples Republic of: Livestock and Products; Annual, by Michael Woolsey and Jianping 

Zhang. GAIN Report no. CH11042, September 2, 2011. 

———. China: Pork Exports to China on the Rise, by Michael Woolsey and Jianping Zhang. GAIN 

Report no. CH11020, May 5, 2011. 

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Report no. HK1133, August 24, 2011. 

———. Livestock and Poultry: World Markets and Trade, October 2010. 

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———. Production, Supply, and Distribution Online database, (accessed February 6, 2012). 
10-26

———. Ukraine: Livestock and Products Voluntary Annual Report, by Alexander Tarassevych. GAIN 

Report, September 14, 2009. 

———. Ukraine: Livestock and Products Voluntary Annual Report, by Alexander Tarassevych. GAIN 

Report no. UP1024, October 14, 2010. 

———. Ukraine: Livestock and Products Voluntary Annual Report, by Alexander Tarassevych. GAIN 

Report no. UP1126, September 8, 2011. 

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Guideline: Program for Certifying Pork Intended for Export to the European Union; PFEU 

Program.” 

http://www.fsis.usda.gov/Regulations_&_Policies/Program_for_Certifying_Pork/index.asp

(accessed November 9, 2011). 

U.S. Department of Agriculture (USDA). Grain Inspection, Packers and Stockyards Administration, 

Packers & Stockyards Program Annual Report 2010. 

———. National Agricultural Statistics Service (NASS). Livestock Slaughter: 2010 Summary, 

April 2011. 

United States Trade Representative (USTR). 2011 Report on Sanitary and Phytosanitary Measures. 

March 2011. 

———. 2011 National Trade Estimate Report on Foreign Trade Barriers, March 2011. 

Veloso, Rui F., and Luciene Teixeira. Economic Aspects of the Agricultural Production in Brazil.

Brazilian Agricultural Research Corporation (EMBRAPA), December 13, 2010. 

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———. World Animal Health Information Database. 

http://web.oie.int/wahis/public.php?page=disease_outbreak_report&country=CHE&reportid=100

0015313&WAHIDPHPSESSID=8abdbac9ea3ac26e2917d095a62983ab (accessed November 30, 

2011). 

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Lozoya Austin, Carlos Arruda, and Marina Silva Araújo. Geneva: WEF, 2009. 

World Trade Organization (WTO). Tariff Download Facility database. http://tariffdata.wto.org/ (accessed 

November 30, 2011). 
11-1

CHAPTER 11 

Estimated Effects of Nontariff Measures 

and Brazil’s Preferential Tariffs 

Overview 

This study used an applied general equilibrium (AGE) global trade model to estimate the 

economic effects of selected non-tariff measures (NTMs) on U.S. and Brazilian exports 

of meat, grain, and oilseed products in major third-country export markets. This model 

was also used to estimate the economic effects of preferential tariffs negotiated under 

Brazil’s free trade agreements (FTAs) on U.S. and Brazilian exports. 

Model simulations suggest that in 2010, food and agricultural NTMs in five major 

markets—the European Union (EU-27), Japan, Korea, China, and Russia—reduced U.S. 

exports of meats and grains by $5.0–$11.0 billion (the equivalent of 17–37 percent).1

NTMs in these markets also reduced Brazilian exports of meats and grains by $3.7–

$5.9 billion (23–38 percent). The largest effects for the United States, in terms of value, 

relate to beef exports, while the largest effects for Brazil relate to poultry exports. NTMs 

in the EU-27 account for most of the reduced exports for both the United States and 

Brazil. 

Mercosul, a customs union in South America, is Brazil’s most significant free trade 

agreement (FTA) and the only FTA modeled in this report.2

 As a member of Mercosul, 

Brazil has signed limited agreements with other countries, but because of the small 

number of agricultural products covered and the minimal preferences provided, the 

impacts of other agreements on Brazilian agricultural exports were not modeled by 

USITC staff. Model simulations were used to estimate how U.S. food and agricultural 

exports would change under a scenario where Brazil’s imports from or exports to the rest 

of Mercosul stopped receiving preferential duties and trade became subject to MFN 

tariffs. Two separate model simulations were undertaken, reflecting alternative 

assumptions about which tariff preferences are removed. The first simulation estimates 

the effects on U.S. food and agricultural exports in 2010 if none of Brazil’s imports from 

or exports to the rest of Mercosul received preferential duties, i.e., all of Brazil’s trade 

with Mercosul faced normal trade relations duties. The second simulation estimates the 

effect on U.S. food and agricultural exports in 2010 if Brazil’s food and agricultural trade 

with the rest of Mercosul stopped receiving preferential duties, leaving tariff preferences 

on manufactured goods in place. 

 1

 USITC staff research found no trade-distorting NTMs on soybeans and soybean products in any of the 

five focus markets. USITC staff are aware of U.S. industry issues related to the acceptance of GM products in 

the EU-27, but staff found no price gaps in 2010 related to NTMs for these products, expressed as the 

differences between global prices and EU-27 import prices. For more information on soybeans and soybean 

products, see chapter 6. 2

 Mercosul is discussed in more detail in chapter 2. For the purpose of the modeling simulations, the 

Commission has defined Mercosul as all current Mercosul members, associate members, and observers. In 

addition to Brazil, these include Argentina, Paraguay, Uruguay, Bolivia, Chile, Colombia, Ecuador, Mexico, 

Peru, and Venezuela.
11-2

Results from the first simulation show that removing tariff preferences on all products 

(food, agriculture, and manufactures) would lead to an increase in U.S. food and 

agricultural exports to Brazil and to the rest-of-Mercosul: U.S. food and agricultural 

exports to Brazil would increase by $62–$116 million (11–21 percent) and exports to the 

rest-of-Mercosul would increase by $14–$20 million (0.08–0.11 percent). While U.S. 

food and agricultural exports to Mercosul would expand, the simulation results indicate a 

small drop in U.S. food and agricultural exports to the world, falling by $109–

$115 million (0.1 percent) in 2010. This counterintuitive result was obtained because 

food and agricultural trade between Brazil and other Mercosul countries is relatively 

small compared with trade in manufactured products, and also because Mercosul’s tariff 

preferences for manufactures are larger than those for food and agricultural products. 

Thus, removing tariff preferences on all products induces a shift in global export demand 

for U.S. products: demand for global U.S. manufacturing exports would be stimulated, 

while demand for global U.S. food and agricultural exports would slightly decline. As a 

result of the shift in U.S. export demand, the prices of manufactures would rise relative to 

agricultural prices, causing a shift in resources away from food and agricultural 

production. This in turn would slightly reduce the quantity of U.S. agricultural output. 

Nevertheless, even though total U.S. food and agricultural exports would decline, U.S. 

exports of selected food and agricultural products, including wheat, and beef and pork 

meat, would expand. These are products for which Brazil’s tariff preferences are 

relatively large and U.S. producers can easily expand their exports. The simulation results 

also show that for 2010, the absence of Brazil’s preferential tariffs with its Mercosul 

partners would have caused a decline in Brazilian food and agricultural exports to the 

world of $356–$378 million, or 1 percent. 

Results from the second simulation show that removing tariff preferences on just food 

and agricultural products would cause U.S. food and agricultural exports to the world to 

increase by $121–$148 million (0.1 percent) in 2010. If food and agricultural tariff 

preferences were removed while manufacturing preferences remained in place, only 

demand for U.S. food and agricultural exports would be stimulated, without any 

significant change in demand for U.S. manufacturing exports. 

Although the direction of the change in U.S. food and agricultural exports differs, 

depending on the assumption about tariff preference removal, in either case the impact is 

negligible. Further, any effect on U.S. food and agricultural exports associated with 

Mercosul preferences would likely be overwhelmed by normal annual variations in food 

and agricultural trade that are driven by weather-related supply adjustments and incomerelated changes in demand. Thus, if Brazil’s Mercosul preferences were removed, any 

potential effect on U.S. food and agricultural exports could be imperceptible. In addition 

to model assumptions about the demand for food and agricultural and manufactured 

products, these simulated effects are sensitive to model assumptions about the 

reallocation of resources between food and agriculture and manufactures for the global 

economy. Given the small size of these effects, it is possible that changes in model 

assumptions could produce different results. 

The AGE model used in this study covers 50 sectors and 21 economies. Thirty-eight 

sectors represent food and agricultural products, including the products that are the focus 

of this report, that is, meats, grains, and soybean products. Besides the United States and 

Brazil, the AGE model includes Brazil’s trade partners in Mercosul, China, the EU-27, 

Japan, Korea, Russia, and other major economies producing agricultural goods. The data 
11-3

in the simulation model are for 2010, and simulated effects reflect long-term adjustments 

in factor markets.3

 Appendix E discusses the details of the simulation model and the 

simulation inputs. 

Simulated Effects of Nontariff Measures Affecting U.S. and 

Brazilian Exports 

The USITC conducted economic model simulations to examine the effects of NTMs 

affecting certain U.S. and Brazilian agricultural exports to five partner countries: China, 

the EU-27, Japan, Korea, and Russia, known as the focus markets.4

 The set of products 

considered includes 11 agricultural products for which USITC staff research indicated 

that NTMs were impeding imports into individual focus markets.5

 The 11 agricultural 

products include wheat, corn, and several beef products (meat, offal, and processed), pork 

products (meat, offal, and processed), and poultry products (whole, pieces, and 

preserved).6

Focus markets may not have NTMs impeding trade in all products. In table 11.1, a 

checkmark indicates the products and corresponding focus markets for which there were 

known NTMs and for which import prices were higher than the world price or imported 

quantities were negligible. In some cases, staff research indicated the presence of a traderestricting policy; however, a positive tariff equivalent could not be calculated, and the 

product was excluded from the simulation analysis. This was principally the case for pork 

exports to China.7

 

For the cases noted in table 11.1, the USITC’s model simulations removed estimated 

tariff equivalents that measure the trade restrictiveness of NTMs in the identified 

products. These tariff equivalents were calculated separately for each exporter and 

destination market, using bilateral data on values and quantities traded.8

 The estimated 

tariff equivalents, calculated in ad valorem terms (i.e., as a percentage of the value of the 

traded good), are shown in the lower panel of tables 11.3–11.7. They reflect the aggregate 

estimated effect of all known and unknown NTMs specific to these products, as well as 

the effect of factors affecting importation of products in general, such as customs 

procedures, notice and comment procedures, and tax policies. 

 3

 Based on labor supply functions for the whole economy, labor employment would increase if the real 

wage increased; similar adjustments would take place for land use. Economy-wide capital would adjust so 

that returns to capital do not change. 4

 The simulation framework is described in appendix E. 5

 Staff used a variety of resources. Many of these were government publications, such as the U.S. 

Department of Agriculture (USDA) Foreign Agricultural Service (FAS) attaché reports (GAIN reports); 

USDA Food Safety and Inspection Service (FSIS) “Export Requirements” guides; USITC and United States 

Trade Representative (USTR) reports; and publications of the European Commission Directorate General for 

Agriculture and Rural Development. Staff also drew on industry publications, such as the Brazilian Meat 

Monitor and Meat Trade News Daily, and interviews with government officials and industry representatives. 6

 Information about NTMs that affect these products is found in chapters 7–10. 7

 For an analysis of Chinese NTMs affecting U.S. exports of pork products, see USITC, China’s 

Agricultural Trade, March 2011. 8

 See appendix E for details. 
11-4

TABLE 11.1 Products and markets used in the NTM simulation analysis 

 Third-country market 

Product China EU-27 Japan Korea Russia 

Wheat ✓ ✓ ✓

Corn ✓ ✓ ✓ 

Beef ✓ ✓ ✓ ✓ ✓

Beef offal ✓ ✓ ✓ ✓ ✓

Processed beef ✓ 

Pork (a

) (a) ✓ ✓ ✓

Pork offal (a

) (a) ✓ ✓ ✓

Processed pork (a) ✓

Poultry, whole birds ✓ ✓ ✓ ✓

Poultry, pieces and offal ✓ ✓ ✓ ✓

Preserved poultry ✓ ✓ 

Source: Compiled by USITC staff. 

 aProduct was not included in the simulation analysis because a representative positive tariff equivalent of a 

known NTM could not be calculated. 

The analysis below consists of six simulation scenarios. The first scenario considers the 

simultaneous elimination of all NTMs across the five focus markets for all of the 

products—that is, wheat, corn, beef products, pork products, and poultry products.9

 The 

other five scenarios consider the elimination of all NTMs across the focus markets for 

each of the product groups. 

Changes in trade due to the elimination of NTMs reflect a combination of factors, such as 

the size of the estimated ad valorem equivalents (AVEs) of NTMs, which measure the 

NTMs’ restrictiveness; baseline conditions, such as the initial market shares of the 

exporting countries; and general equilibrium adjustments, such as income and price 

effects. While NTMs affecting a specific market or facing an exporter across markets 

typically restrict exports, market liberalization can also cause imports from a supplier to 

fall in one or more markets. For example, if restrictive NTMs on a U.S. product in one 

market are removed, U.S. exports of the product to that market may still decline if 

another supplier to the same market had been facing NTMs that were even more 

restrictive—and that were also removed. In other cases, increased demand in large 

markets, such as the EU-27 or Japan, can cause the world price of the product to rise to 

the point where the quantity demanded in smaller markets declines. 

All Focus Products Considered Together 

The first simulation analyzes the combined effects on trade of all NTMs affecting all the 

focus products shown in table 11.1 in all five focus markets. 10 The results of this 

simultaneous removal of NTMs for 2010 are shown in table 11.2. These results show that 

U.S. exports of the focus products would have been higher by $5.0–$11.0 billion (an 

 9

 The analysis illustrates potential changes in trade flows from the removal of NTMs, and it makes no 

judgment about the feasibility or desirability of such a policy scenario. Countries may sometimes impose 

NTMs for legitimate purposes, such as for health and safety reasons. 10 Information about NTMs that affect the focus products is found in chapters 7–10. 
11-5

TABLE 11.2 Simulated effects of the removal of corn, wheat, beef, pork, and poultry NTMs 

Product Exporter 

Exports to 

the world, 

2010 

Change in

exports to the 

world 

Change in imports 

China EU-27 Japan Korea Russia

 Million $ 

All 

products 

U.S. 29,748 4,956–10,965 703–2,008 3,385–8,317 939–1,433 167–330 123–377

Brazil 15,763 3,669–5,936 (91)–(68) 4,692–7,391 (654)–(449) 40–90 461–536

Other 38,678 5,073–7,449 (396)–(186) 2,623–2,874 2,240–3,195 (391)–(179) (158)–78

Sources: UNSD, Comtrade; USITC staff estimates. 

Notes: Figures in parentheses indicate a negative number. EU-27 exports counted under “other exporters” exclude intra-EU trade. 

The simulated effects are given in ranges calculated by performing sensitivity analysis with respect to the values of the 

international trade elasticities in the simulation model. Changes in total exports may differ from the sum of changes in imports in 

the five focus markets because of import changes in other countries. Exports are free on board (f.o.b.). Imports are cost, 

insurance, and freight (c.i.f.). 

increase of 17–37 percent) in this scenario, while Brazilian exports of these products 

would have been higher by $3.7–$5.9 billion (23–38 percent). These are considerable 

trade expansions, and they are driven primarily by the resulting higher demand for these 

products in the EU-27 from all sources and by increased exports of U.S. products to 

China and Japan. 

Changes in total exports are determined by changes in imports in the five focus markets, 

as well as resulting changes in imports in all other countries. Removal of all NTMs in the 

five focus markets would have increased U.S. and Brazilian exports to the focus markets 

by $12.5 billion and $7.3 billion, respectively, if the upper-bound effects were aggregated 

(table 11.2). Despite higher production, demand in the focus markets would have 

expanded strongly enough to raise the world price of these products, which would in turn 

decrease the quantity demanded in other markets. U.S. and Brazilian exports to those 

other markets would have declined by as much as $1.5 billion and $1.3 billion.11 The 

difference between the increases in global exports to and imports from liberalized focus 

markets reflects this trade diversion and the changes in the quantity demanded in other 

markets caused by rising world prices. 

Corn 

The United States is the world’s largest exporter of corn, accounting for 61 percent of 

global exports in 2010. That year, Brazil was the second-largest exporter of corn, 

accounting for about 15 percent of world corn exports. In 2010, about 45 percent of U.S. 

corn exports went to the focus markets (primarily Japan and Korea), while about 

20 percent of Brazilian corn exports were sent to focus markets (primarily the EU-27). 

Table 11.3 presents the simulated effects on corn exports from the United States, Brazil, 

and other corn exporters in 2010 if all corn NTMs were removed in the focus markets.12

U.S. corn exports would have been higher by between $281 million and $1.3 billion 

under this scenario, representing a 3–12 percent increase in total U.S. exports of corn. 

The largest trade-restricting NTMs faced by U.S. corn exports are in China and the 

EU-27, and the potential expansion in U.S. exports of corn is driven mostly by the 

restrictiveness of the NTMs in these two markets. The effects on Brazilian corn exports, 

 11 U.S. exports to other countries would decline by $361 million to $1.5 billion. Brazilian exports to 

other countries would decline by $1.0–$1.3 billion. 12 Information about NTMs that affect corn in the focus markets is found in chapter 7. 
11-6

TABLE 11.3 Simulated effects of the removal of corn NTMs and estimated AVEs of known corn NTMs 

Product Exporter 

Exports to the 

world, 2010 

Change 

in exports 

to the 

world 

Change in imports 

China EU-27 Japan Korea Russia

 Million $ 

Corn 

U.S. 10,352 281–1,290 102–363 171–1,002 28–49 (1)–0 0–0

Brazil 2,504 48–91 (7)–(4) 78–145 (41)–(19) 0–0 0–0

Other 4,034 56–80 (15)–(11) 62–67 7–18 0–4 0–1

 Estimated NTM AVEs removed in simulation 

 Percent 

Corn 

U.S. 157 116 21 (a

) (a)

Brazil 29 19 9 (a) (a)

Other 11 12 22 (a

) (a)

Sources: UNSD, Comtrade; USITC staff estimates. 

Notes: Figures in parentheses indicate a negative number. EU-27 exports counted under “other exporters” exclude intra-EU trade. 

The simulated effects are given in ranges calculated by performing sensitivity analysis with respect to the values of the 

international trade elasticities in the simulation model. Changes in total exports may differ from the sum of changes in imports in 

the five focus markets because of import changes in other countries. Exports are free on board (f.o.b.). Imports are cost, 

insurance, and freight (c.i.f.). 

 aUSITC staff research found no known trade-restricting NTMs. 

which would have increased by $48–$91 million (a 2–4 percent increase), are smaller 

than for the United States but are also driven by NTMs in China and the EU-27. 

Wheat 

The United States is the world’s largest wheat-exporting country and supplied wheat 

valued at about $6.9 billion globally in 2010 (about 39 percent of world wheat exports). 

That year, the United States exported approximately 21 percent of its wheat exports to 

China, the EU-27, Japan, Korea, and Russia. In contrast, Brazil is a relatively small 

exporter of wheat, accounting for just 1 percent of global exports. Table 11.4 presents the 

simulated effects on wheat exports from the United States, Brazil, and other exporters in 

the absence of NTMs on wheat in the focus markets.13 U.S. wheat exports for 2010 would 

have been higher by $241–$751 million under this scenario, representing a 4–11 percent 

increase in total U.S. exports of wheat. This gain is largely driven by increased imports of 

U.S. wheat in China, the focus market where U.S. wheat faces its most restrictive NTMs. 

Simulated effects for Brazilian exports of wheat are fairly small in general; total exports 

of Brazilian wheat would have fallen by $6–$7 million with the removal of NTMs, as 

Korean imports of Brazilian wheat would have declined in favor of U.S. wheat. 

Beef Products 

Brazil and the United States are the world’s two largest exporters of beef products, with 

each country’s exports of beef products totaling $4.7 billion and $4.0 billion, 

respectively, in 2010. U.S. and Brazilian exports of beef to all focus markets combined 

were comparable at $1.4 billion and $1.6 billion, respectively, but market shares varied

 13 Information about NTMs that affect wheat is found in chapter 7. 
11-7

TABLE 11.4 Simulated effects of the removal of wheat NTMs and estimated AVEs of known wheat NTMs 

Product Exporter 

Exports to the 

world, 

 2010 

Change 

in exports 

to the 

world 

Change in imports 

China EU-27 Japan Korea Russia

 Million $ 

Wheat U.S. 6,861 241–751 139–865 (21)–(2) (84)–30 116–304 0–0

Brazil 244 (7)–(6) 0–0 0–0 0–0 (12)–(8) 0–0

Other 10,532 24–55 (245)–(81) (8)–(1) 193–475 (284)–(97) 0–0

 Estimated NTM AVEs removed in simulation 

 Percent 

Wheat 

U.S. 46 (a

) 40 30 (a)

Brazil 1 (a) 2 1 (a)

Other (a

) (a) 46 18 (a)

Sources: UNSD, Comtrade; USITC staff estimates. 

Notes: Figures in parentheses indicate a negative number. EU-27 exports counted under “other exporters” exclude intra-EU trade. 

The simulated effects are given in ranges calculated by performing sensitivity analysis with respect to the values of the 

international trade elasticities in the simulation model. Changes in total exports may differ from the sum of changes in imports in 

the five focus markets, because of import changes in other countries. Exports are free on board (f.o.b.). Imports are cost, 

insurance, and freight (c.i.f.). 

 aStaff research found no known trade-restricting NTMs. 

considerably among focus markets; U.S. beef exports went primarily to Japan and Korea, 

while Brazilian beef exports were sent largely to Russia and the EU-27. Table 11.5 shows 

the simulated effects on exports of beef meat, beef offal, and processed beef from the 

United States, Brazil, and other suppliers if there had been no NTMs on beef in the focus 

markets in 2010.14 U.S. exports of beef meat would have been higher by $3.4–$6.7 billion 

in this scenario. The focus market with the most restrictive NTMs on both U.S. and 

Brazilian beef meat is the EU-27. As a result, the increase in U.S. exports would have 

been driven mostly by higher imports of U.S. beef meat in the EU-27. Brazilian exports 

of beef meat to the EU-27 would have been higher by $602–$808 million, but NTMs in 

the other focus markets are less restrictive on imports of Brazilian beef meat. Although 

demand for Brazilian beef meat would have increased in the EU-27, demand would have 

declined in Russia and other importing markets in favor of imports from other sources, 

resulting in an ambiguous change in Brazilian total exports of beef meat. 

Without NTMs in 2010, exports of beef offal would have been higher for both Brazil and 

the United States—and in similar magnitudes. Imports of U.S. beef offal would have 

increased mainly in Russia. Brazilian beef offal exports, which face the most restrictive 

NTMs in the EU-27, would have seen the largest expansion of imports in that market. 

Restrictive NTMs on processed beef were identified for U.S. exports to the EU-27. In the 

absence of these measures, U.S. exports to the EU-27 would have been higher by $66–

$708 million. With demand for U.S. processed beef increasing in the EU-27, 

consumption of processed beef in the EU-27 market from Brazil and other suppliers 

would have declined, resulting in declines in total exports of processed beef from these 

regions. 

 14 Information about NTMs that affect beef is found in chapter 9. 
11-8

TABLE 11.5 Simulated effects of the removal of beef NTMs and estimated AVEs of known beef NTMs 

Product Exporter 

Exports to 

the world, 

2010 

Change 

in exports 

to the 

world 

Change in imports 

China EU-27 Japan Korea Russia

 Million $ 

Beef meat U.S. 3,379 3,449–6,749 1–1 3,135–6,590 686–1,338 (4)–24 (25)–32

Brazil 3,964 (131)–48 (4)–(4) 602–808 0–0 0–1 (357)–(256)

Other 9,933 998–2,043 (15)–(6) (252)–137 (140)–(137) (58)–(55) 385–823

Beef offal U.S. 466 146–739 0–1 12–82 (96)–(94) 19–44 138–461

Brazil 214 117–952 0–1 166–1,196 0–0 0–0 0–0

Other 647 924–1,127 (12)–(7) 2–13 1,025–1,370 (50)–(21) (59)–5

Processed 

beef 

U.S. 146 61–679 0–0 66–708 0–0 0–0 0–0

Brazil 539 (160)–(41) 0–0 (166)–(48) 0–1 0–0 0–0

Other 470 (26)–(16) 0–0 (75)–(26) 3–23 0–0 (1)–0

 Estimated NTM AVEs removed in simulation 

 Percent 

Beef meat 

U.S. 44 118 23 8 23

Brazil 3 101 9 12 6

Other 12 38 (a

) (a) 9

Beef offal U.S. 93 61 (a

) 14 34

Brazil 35 148 12 27 23

Other 25 (a

) 200 (a) 19

Processed 

beef 

U.S. (a

) b118 (a) (a) (a)

Brazil (a

) (a) (a) (a) (a)

Other (a

) (a) (a) (a) (a)

Sources: UNSD, Comtrade; USITC staff estimates. 

Notes: Figures in parentheses indicate a negative number. EU-27 exports counted under “other exporters” exclude intra-EU trade. 

The simulated effects are given in ranges calculated by performing sensitivity analysis with respect to the values of the international 

trade elasticities in the simulation model. Changes in total exports may differ from the sum of changes in imports in the five focus 

markets because of import changes in other countries. Exports are free on board (f.o.b.). Imports are cost, insurance, and freight 

(c.i.f.). 

a

USITC staff research found no known trade-restricting NTMs. 

b

USITC staff research indicated that in the EU-27, beef meat, beef offal, and processed beef from the United States are subject to 

the same NTMs. Because the United States is not a large exporter of processed beef, a representative price gap could not be 

calculated and the calculated price gap for U.S. beef meat exports to the EU-27 was used. 

Pork Products 

The United States is the largest global exporter of pork products, with exports of 

$4.5 billion in 2010. Brazil is the fourth-largest exporter of pork products (after the 

EU-27 and Canada), exporting $1.3 billion worth in 2010. Most U.S. pork exports to the 

focus markets go to Japan, while Brazilian pork exports, because of sanitary restrictions 

in other focus markets, are shipped mostly to Russia. U.S. pork exports exceed Brazilian 

pork exports in all five focus markets, except in Russia. Table 11.6 shows the simulated 

effects on pork exports from the United States, Brazil, and other pork exporters if these 

NTMs had not been in place in 2010. 15 NTMs on pork exported to China are not 

considered in the analysis because of the difficulty in estimating accurate NTM AVEs, 

due to the low unit value of pork imported into China.16 

 15 Information about NTMs that affect pork is found in chapter 10. 

16 USITC staff research indicated the presence of trade-restricting NTMs affecting imports of pork into 

China. However, a representative positive tariff equivalent of the NTM could not be calculated due to the low 

unit value of pork imported and consumed in China relative to the price of world imports of pork from the 

same supplier, which makes the calculation of a positive tariff equivalent infeasible. 
11-9

TABLE 11.6 Simulated effects of the removal of pork NTMs and estimated AVEs of known pork NTMs 

Product Exporter 

Exports to 

the world, 

2010 

Change 

in exports 

to the 

world 

Change in imports 

China EU-27 Japan Korea Russia

 Million $ 

Pork meat 

U.S. 3,502 (96)–(53) (2)–(1) (1)–(1) (58)–(31) (9)–(5) (49)–(35)

Brazil 1,213 449–774 0–0 18–44 80–272 20–50 442–539

Other 6,610 (526)–(372) 0–0 (21)–(17) (57)–(13) (21)–(8) (503)–(402)

Pork offal U.S. 477 (16)–(7) 2–3 0–0 (24)–(14) (7)–(4) 16–17

Brazil 72 222–433 0–0 34–82 103–225 29–55 41–63

Other 885 (90)–(62) (11)–(8) 0–1 (7)–(4) (9)–(6) (56)–(40)

Processed 

pork 

U.S. 565 35–54 0–0 0–0 0–0 0–0 36–56

Brazil 39 0–0 0–0 0–0 0–0 0–0 0–0

Other 946 (31)–(23) 0–0 0–0 0–0 0–0 (38)–(27)

 Estimated NTM AVEs removed in simulation 

 Percent 

Pork meat 

U.S. (

a

) (b) (b) (b) 15

Brazil (a) c66 c101 c70 32

Other (a) (b) (b) (b) 11

Pork offal 

U.S. (

a

) (b) (b) (b) 9

Brazil (a

) c66 c101 c70 33

Other (a

) (b) (b) (b) (b)

Processed 

pork 

U.S. (

a

) (b) (b) (b) 63

Brazil (a

) (b) (b) (b) 24

Other (a

) (b) (b) (b) 7

Sources: UNSD, Comtrade; USITC staff estimates. 

Notes: Figures in parentheses indicate a negative number. EU-27 exports counted under “other exporters” exclude intra-EU trade. 

The simulated effects are given in ranges calculated by performing sensitivity analysis with respect to the values of the international 

trade elasticities in the simulation model. Changes in total exports may differ from the sum of changes in imports in the five focus 

markets, because of import changes in other countries. Exports are free on board (f.o.b.). Imports are cost, insurance, and freight 

(c.i.f.). 

a

Product was not included in the simulation analysis because a representative positive tariff equivalent of a known NTM could not 

be calculated. b

Staff research found no known trade-restricting NTM. 

c

The estimated NTM AVEs for Brazilian pork meat and pork offal are approximately equal within each market. Since the NTMs 

facing these imports are the same, same estimates were used for pork meat and pork offal within each of these markets. 

Without NTMs in 2010, Brazilian exports of pork meat and pork offal would have been 

higher by an estimated $449–$774 million and $222–$433 million, respectively. These 

are pork products where Brazil faced higher NTMs in 2010 than any other supplier. U.S. 

total exports of pork meat and pork offal would have declined by as much as $96 million 

and $16 million, respectively, as Brazilian exports of these products would have 

expanded in the focus markets. On the other hand, NTMs on processed pork were more 

restrictive for the United States than for any other supplier, and U.S. exports of processed 

pork would have been $35–$54 million higher in the absence of pork NTMs in 2010. 

Poultry Products 

Brazil and the United States are the world’s two largest exporters of poultry meat 

products, accounting for 45 percent and 26 percent of world exports of poultry, 

 
11-10

respectively, in 2010. 17 Brazilian poultry exports exceed U.S. poultry exports both 

globally and to the five focus markets combined. Table 11.7 shows the simulated effects 

on poultry exports from the United States, Brazil, and other exporters if there were no 

NTMs on poultry exports to the focus markets for 2010. 18 U.S. poultry exports are 

concentrated in poultry pieces (cuts) (rather than whole birds or preserved poultry), and 

these exports would have expanded considerably—by $571–$681 million (16–

20 percent)—under this scenario, driven by increases in exports to China and Japan. On 

the other hand, exports of whole birds and preserved poultry from Brazil, which exports 

much higher volumes of these products than the United States and has a comparative 

advantage, would have increased dramatically. This trade expansion would have been 

driven mostly by sharp increases in imports of Brazilian whole and preserved poultry by 

the EU-27. 

TABLE 11.7 Simulated effects of the removal of poultry NTMs and estimated AVEs of known poultry NTMs 

Product Exporter 

Exports to 

the world, 

2010 

Change 

in exports 

to the 

world 

Change in imports 

China EU-27 Japan Korea Russia

 Million $ 

Whole 

poultry 

U.S. 207 117–197 14–28 0–0 34–61 0–0 1–1

Brazil 2,389 1,273–1,921 1–2 1,481–2,302 (9)–(9) 0–0 94–124

Other 239 70–117 0–0 (19)–0 45–78 0–0 (32)–(28)

Poultry 

pieces 

U.S. 3,492 571–681 293–388 15–31 298–300 0–1 (82)–(65)

Brazil 3,811 (24)–51 (81)–(62) 706–854 (883)–(806) (2)–(1) 144–176

Other 1,506 2,909–3,916 (100)–(77) 1,975–2,733 1,113–1,408 0–0 (68)–(56)

Preserved 

poultry 

U.S. 300 152–390 153–395 0–0 0–0 0–0 0–0

Brazil 774 1,614–2,097 0–0 1,667–2,167 0–0 0–0 (1)–(1)

Other 2,875 487–498 3–4 488–497 (1)–(1) 0–0 (1)–0

 Estimated NTM AVEs removed in simulation 

 Percent 

Whole 

poultry 

U.S. 112 16 107 (b

) 34

Brazil 85 118 (b) (b) 73

Other (a

) 19 107 (b) 15

Poultry 

pieces 

U.S. 18 69 63 (b

) 1

Brazil (a

) 24 (b) (b) 12

Other (a

) 35 84 (b) (b)

Preserved 

poultry 

U.S. 207 16 (b

) (b) (c)

Brazil 62 29 (b

) (b) (b)

Other 120 16 (b

) (b) (b)

Sources: UNSD, Comtrade; USITC staff estimates. 

Notes: Figures in parentheses indicate a negative number. EU-27 exports counted under “other exporters” exclude intra-EU trade. 

The simulated effects are given in ranges calculated by performing sensitivity analysis with respect to the values of the international 

trade elasticities in the simulation model. Changes in total exports may differ from the sum of changes in imports in the five focus 

markets, because of import changes in other countries. Exports are free on board (f.o.b.). Imports are cost, insurance, and freight 

(c.i.f.). 

a

Product was not included in the simulation analysis because a representative positive tariff equivalent of a known NTM could not 

be calculated. b

USITC staff research found no known trade-restricting NTM. 

c

Because known NTMs affect U.S. exports of preserved poultry to Russia indirectly and might not have a substantial traderestricting effect, the estimated ad valorem equivalent of the known NTM was excluded from the analysis. 

 17 The export shares for poultry presented in chapter 11 are different than the shares listed in table 8.1 

of the report. For the model simulation discussed here, all poultry meats, including chicken and turkey, were 

included rather than only broiler (chicken) meat in chapter 8. In addition, chapter 11 data are values in 2010 

(the last year modeling data are available), while chapter 8 compares volumes exported in 2011. Lastly, 

chapter 11 uses data generated and updated specifically for the GTAP model, and chapter 8 uses USDA data. 18 Information about NTMs that affect poultry is found in chapter 8. 
11-11

Simulated Effects of Preferential Tariffs Negotiated under 

Brazil’s Free Trade Agreements 

In order to estimate the economic effects of the preferential tariffs negotiated under 

Brazil’s FTAs on U.S. and Brazilian food and agricultural exports, the USITC conducted 

economic model simulations19in which preferential tariffs for all products traded between 

Brazil and its Mercosul partners were raised from their 2010 levels to their most-favorednation (MFN) levels. 20 The resulting simulated trade flows were then compared to actual 

trade flows for 2010. The simulation results, represented by the difference between the 

two sets of trade flows, reflect the effects of the removal of tariff preferences negotiated 

under Mercosul on U.S. and Brazilian global exports and imports of food and agricultural 

products. Simulated trade effects are also presented for the rest-of-Mercosul.21

The simulated effects discussed in this section are the marginal effects of Brazil’s 

bilateral tariff preferences in 2010, and they do not incorporate any other effects of 

Brazil’s participation in Mercosul, including other economic policies related to Mercosul 

or economic changes induced by Brazil’s participation in Mercosul since 1995. 

Table 11.8 presents simulated effects of the absence of Brazil’s tariff preferences for the 

value of U.S. exports to Brazil and to the rest-of-Mercosul in meats, grains, and soybean 

products, as well as the aggregate effects for the rest of food and agricultural products. 

The simulated effects in table 11.8 indicate that in the absence of Brazil’s bilateral tariff 

preferences, the value of total U.S. food and agricultural exports to Brazil would have 

been higher by $62–$116 million (11–21 percent) than actual 2010 exports. Among farm 

products, U.S. wheat exports to Brazil would have been higher by $19–57 million (17–

52 percent). In 2010, Brazil imported about $1.6 billion of wheat; the great bulk of it was 

imported from Mercosul countries, mostly Argentina. If Brazil’s bilateral tariff 

preferences were removed, Brazil would have imported less wheat from Argentina and 

more from the United States. In the absence of Brazil’s bilateral tariff preferences, U.S. 

exports of other food products to Brazil would have expanded by $37–$46 million (13–

16 percent), mostly representing processed foods. Table 11.8 also shows that in the 

absence of Brazil’s bilateral tariff preferences, the value of U.S. food and agricultural 

exports to the rest-of-Mercosul would have been higher than actual 2010 exports by $14–

$20 million (less than 1 percent). However, U.S. wheat, beef meat, beef offal, pork offal, 

and soymeal exports to the rest-of-Mercosul would have been slightly lower than in 2010 

because exports from the rest-of-Mercosul to Brazil would have declined, raising the 

supply of those products in their domestic markets and lessening demand for imports 

from the United States. 

Tables 11.9, 11.10, and 11.11 present effects for the value of U.S., Brazilian, and rest-ofMercosul trade with the world for meats, grains, and soybean products, along with 

 19 The USITC’s simulations were performed with an applied general equilibrium (AGE) global trade 

model, the Global Trade Analysis Project (GTAP) model. The simulation framework is described in appendix 

E. 20 Simulated effects from an alternative simulation, which removed preferences for only food and 

agricultural products, are discussed at the end of this section. 21 In this chapter, the “rest-of-Mercosul” is defined as Argentina, Paraguay, Uruguay, Venezuela, 

Bolivia, Chile, Colombia, Ecuador, Peru, and Mexico. 
TABLE 11.8 United States food and agricultural exports to Brazil and to the rest-of-Mercosula: 2010 trade and simulatedb trade effects of removing Brazi

preferences

Sector 

U.S. exports to 

Brazil, model data 

for 2010, f.o.b.

Range of simulated change in U.S.

exports to Brazil absent

Brazilian preferences, f.o.b.c

U.S. exports to the

rest-of-Mercosula, model

data for 2010, f.o.b.

Range 

exports 

Million $ Million $ Percent Million $ Mill

Wheat 109 19–57 17–52 1,220 (3Corn 2 0–0 4–10 2,070 Soybeans 0 0–0 7–9 1,645 Other farm products 139 6–12 4–8 3,701 Beef meat 1 0–0 0–0 648 (1Beef offal 0 0–0 17–32 142 (1Prepared beef meat 5 0–1 8–11 6 Pork meat 0 0–0 0–0 604 Pork offal 0 0–0 0–0 173 (1Prepared pork meat 0 0–0 0–0 233 Poultry meat, whole birds 0 0–0 0–0 41 Poultry meat, pieces and offal 0 0–0 26–32 605 Preserved poultry meat 1 0–0 0–0 44 Soymeal 0 0–0 14–18 832 (7Soybean oil 0 0–0 26–33 341 Other food products 290 37–46 13–16 5,834 16 Totald 550 62–116 11–21 18,137 14Sources: USITC staff calculations; GTAP framework; UNCTAD, TRAINS. Notes: Figures in parentheses indicate a negative number. Dollar values are rounded to whole millions, and percentage changes are rounded to whole nuperformed to produce these data, however, used numbers that were not rounded. f.o.b. = free on board. 

aIn this analysis, the "rest-of-Mercosul" consists of Argentina, Paraguay, Uruguay, Venezuela, Bolivia, Chile, Colombia, Ecuador, Peru, and Mexico. bThe simulation removed 2010 bilateral import tariff preferences between Brazil and its Mercosul partners: Argentina, Paraguay, Uruguay, Venezuela, B

Ecuador, Peru, and Mexico. 

cThe simulated effects are given in ranges that were calculated by performing sensitivity analysis with respect to the values of the international trade ela

model. 

dRanges for total trade have been separately calculated and will not equal to the sum of sectoral changes. 

11-12 
TABLE 11.9 United States food and agricultural trade with the world: 2010 trade and simulateda trade effects of removing Brazilian bilateral tariff preferen

Sector 

U.S. exports to the 

world, model data for

2010, f.o.b.

Range of simulated change in U.S.

exports to the world absent Brazilian preferences, 

f.o.b. b

U.S. imports from 

the world, model 

data for 2010, c.i.f.

Range o

imports from 

Million $ Million $ Percent Million $ Million $ 

Wheat 6,861 22–53 0–1 615 (0)–0 Corn 10,352 (10)–(6) (0)–(0) 349 (0)–0 Soybeans 18,460 (114)–(93) (1)–(1) 248 (1)–(1) Other farm products 30,439 22–26 0–0 33,253 2–6 Beef meat 3,379 1–1 0–0 2,802 1–2 Beef offal 466 (7)–(5) (1)–(1) 99 1–1 Prepared beef meat 146 0–0 0–0 226 3–6 Pork meat 3,502 0–1 0–0 944 1–1 Pork offal 477 (2)–(2) (0)–(0) 22 0–0 Prepared pork meat 565 (0)–0 (0)–0 288 0–0 Poultry meat, whole birds 207 (1)–(1) (1)–(1) 14 0–0 Poultry meat, pieces and offal 3,492 (39)–(32) (1)–(1) 172 0–0 Preserved poultry meat 300 0–0 0–0 96 0–0 Soymeal 3,560 (64)–(58) (2)–(2) 55 (0)–(0) Soybean oil 1,589 (19)–(15) (1)–(1) 53 0–1 Other food products 39,717 57–61 0–0 69,599 42–50  Totalc 123,512 (115)–(109) (0)–(0) 108,835 50–65 Sources: USITC staff calculations; GTAP framework; UNCTAD, TRAINS. Notes: Figures in parentheses indicate a negative number. Dollar values are rounded to whole millions, and percentage changes are rounded to whole nuperformed to produce these data, however, used numbers that were not rounded. f.o.b. = free on board; c.i.f. = cost, insurance, and freight.  aThe simulation removed 2010 bilateral import tariff preferences between Brazil and its Mercosul partners— Argentina, Paraguay, Uruguay, Venezuela

Ecuador, and Peru—as well as Mexico. 

 bThe simulated effects are given in ranges that were calculated by performing sensitivity analysis with respect to the values of the international trade el

model. 

 cRanges for total trade have been separately calculated, and they are not equal to sum of sectoral changes. 

11-13 
TABLE 11.10 Brazilian food and agricultural trade with the world: 2010 trade and simulateda trade effects of removing Brazilian bilateral tariff preferences

Sector 

Brazilian exports to the 

world, model data for

2010, f.o.b.

Range of simulated change in 

Brazilian exports to the world absent 

Brazilian preferences, f.o.b. b

Brazilian imports from the 

world,

 model data for 

2010, c.i.f.

Range of s

Brazilian imports fro

Million $ Million $ Percent Million $ Million $ 

Wheat 244 (6)–(2) (3)–(1) 1,645 (41)–(26) Corn 2,504 (35)–(21) (1)–(1) 77 (8)–(4) Soybeans 11,099 (12)–(10) (0)–(0) 59 (7)–(5) Other farm products 15,205 21–37 0–0 2,332 (199)–(154) Beef meat 3,964 (85)–(52) (2)–(1) 171 (69)–(46) Beef offal 214 4–5 2–2 7 (2)–(2) Prepared beef meat 539 3–5 0–1 8 (1)–(1) Pork meat 1,213 (5)–(5) (0)–(0) 1 (0)–(0) Pork offal 72 2–2 2–3 1 (0)–(0) Prepared pork meat 39 (7)–(6) (19)–(17) 7 (0)–(0) Poultry meat, whole birds 2,389 5–7 0–0 1 (0)–(0) Poultry meat, pieces and offal 3,811 55–71 1–2 4 (1)–(1) Preserved poultry meat 774 12–16 2–2 1 (0)–(0) Soymeal 4,872 (59)–(56) (1)–(1) 14 (3)–(2) Soybean oil 1,397 (13)–(10) (1)–(1) 15 (4)–(4) Other food products 21,172 (315)–(278) (1)–(1) 5,491 (683)–(564) 

TOTALc 69,509 (378)–(356) (1)–(1) 9,833 (1,019)–(809) 

Sources: USITC staff calculations; GTAP framework; UNCTAD, TRAINS. Notes: Figures in parentheses indicate a negative number. Dollar values are rounded to whole millions and percentage changes are rounded to whole nu

calculations performed to produce these data, however, used numbers that were not rounded. f.o.b. = free on board; c.i.f. = cost, insurance, and freight. 

 aThe simulation removed 2010 bilateral import tariff preferences between Brazil and its Mercosul partners—Argentina, Paraguay, Uruguay, Venezuela, 

Colombia, Ecuador, and Peru—as well as Mexico. 

 bThe simulated effects are given in ranges that were calculated by performing sensitivity analysis with respect to the values of the international trade ela

simulation model. 

 cRanges for total trade have been separately calculated, and they are not equal to the sum of sectoral changes. 

11-14 
TABLE 11.11 Rest-of-Mercosula food and agricultural trade with the world: 2010 trade and simulatedb trade effects of removing Brazilian bilateral tariff pr

Sector 

Rest-of-Mercosul exports 

to the world, model data 

for 2010, f.o.b.

Range of simulated change in rest-of-Mercosul 

exports to the world absent Brazilian

preferences, f.o.b. c

Rest-of-Mercosul imports from 

the world, model data

for 2010, c.i.f.

Range of si

imp

Million $ Million $ Percent Million $ M

Wheat 1,537 (123)–(53) (8)–(3) 2,446 Corn 2,732 6–39 0–1 3,677 (1Soybeans 7,960 30–63 0–1 2,095 Other farm products 30,753 (21)–(19) (0)–(0) 9,638 (116Beef meat 2,911 16–23 1–1 1,928 Beef offal 146 8–16 6–11 189 Prepared beef meat 180 7–13 4–7 37 Pork meat 615 4–5 1–1 936 Pork offal 17 1–1 7–9 227 Prepared pork meat 33 (0)–(0) (1)–(1) 287 Poultry meat, whole birds 80 1–1 2–2 402 Poultry meat, pieces and offal 520 20–25 4–5 761 (1Preserved poultry meat 58 1–2 2–3 88 Soymeal 7,847 27–44 0–1 2,333 (1Soybean oil 2,027 29–32 1–2 1,212 (Other food products 34,360 (428)–(362) (1)–(1) 21,047 (260 Totald 91,774 (307)–(285) (0)–(0) 47,301 (460Sources: USITC staff calculations; GTAP framework; UNCTAD, TRAINS. Notes: Figures in parentheses indicate a negative number. Dollar values are rounded to whole millions and percentage changes are 

rounded to whole numbers. The calculations performed to produce these data, however, used numbers that were not rounded. f.o.b. = 

free on board; c.i.f. = cost, insurance, and freight.  aIn this analysis, the "rest-of-Mercosul" consists of Argentina, Paraguay, Uruguay, Venezuela, Bolivia, Chile, Colombia, Ecuador, Peru, 

and Mexico. 

 bThe simulation removed 2010 bilateral import tariff preferences between Brazil and its Mercosul partners—Argentina, Paraguay, 

Uruguay, Venezuela, Bolivia, Chile, Colombia, Ecuador, and Peru—as well as Mexico. 

 cThe simulated effects are given in ranges that were calculated by performing sensitivity analysis with respect to the values of the 

international trade elasticities in the simulation model. 

 dRanges for total trade have been separately calculated and will not equal to the sum of sectoral changes. 

11-15 
11-16

aggregate effects for the remaining food and agricultural products. The simulated effects 

in table 11.9 indicate that in the absence of Brazil’s bilateral preferential tariffs, the value 

of total U.S. exports of food and agricultural products would have been lower than actual 

2010 U.S. exports by $109–$115 million (less than 1 percent). Tables 11.10 and 11.11 

indicate that in the absence of Brazil’s bilateral preferential tariffs, Brazilian food and 

agricultural imports would have been $809–$1,019 million lower than 2010 imports, 

while food and agricultural imports by the rest-of-Mercosul would have been $400–

$460 million lower. The direction and magnitude of these effects are driven by the 

sectoral composition of bilateral trade between Brazil and the rest-of-Mercosul and the 

extent of the corresponding tariff preferences. Two observations can be made in regard to 

the impact of the sectoral composition of trade and the extent of tariff preferences. First, 

in 2010 food and agricultural trade between Brazil and the rest-of-Mercosul was small 

relative to manufacturing trade. Bilateral food and agricultural trade amounted to about 

$11 billion, while bilateral manufacturing trade amounted to about $69 billion. This level 

of food and agricultural trade would have declined if Brazil’s bilateral trade preferences 

were removed, and Brazil and the rest of Mercosul would have increased their imports 

from the rest of the world, including the United States. However, because the 2010 level 

of trade is small, the simulated effects are small for U.S. exports of food and agricultural 

products and for Brazilian and rest-of-Mercosul imports of food and agricultural products 

(these effects are shown in tables 11.9, 11.10, and 11.11). 

Second, figure 11.1 shows that in 2010 the extent of Brazil’s bilateral tariff preferences 

was larger for manufactures than it was for food and agriculture. Relatively large 

preferences coupled with relatively large bilateral trade in manufactures implies that in 

the absence of Brazil’s bilateral tariff preferences, Brazil and the rest-of-Mercosul region 

would have traded less bilaterally and increased their manufacturing imports from the 

rest-of-the-world by larger amounts than their food and agricultural imports. Under the 

assumptions made by the model, for the rest-of-the-world to expand its manufacturing 

exports significantly to meet the increased demand in Brazil and the rest-of-Mercosul, 

productive resources would have been reallocated from the rest of the economy to 

manufactures. Thus, while manufacturing exports would have expanded, other exports, 

such as food and agriculture, would have declined. This explains the simulated overall 

decline in U.S. food and agricultural exports to the world shown in table 11.9. 

Although the value of overall U.S. food and agricultural exports to the world would have 

declined in the absence of Brazil’s bilateral tariff preferences (table 11.9), U.S. exports of 

certain food and agricultural products would have expanded. U.S. exports of wheat, beef 

and pork meat, and the two aggregate categories of other farm and other food products 

would have expanded in the absence of Brazil’s bilateral tariff preferences. These are the 

products for which Brazil’s tariff preferences are relatively large and U.S. producers can 

easily expand their exports. Because land in the United States is assumed to be fully 

utilized, in order to allow the United States to increase its exports to Mercosul of certain 

products, such as wheat, production of these products would have expanded onto land 

previously used to produce other food and agricultural goods, resulting in production 

declines in those other goods. 
FIGURE 11.1 The extent of bilateral tariff preferencesa at the sector level between Brazil and its Mercosul trading partners for 2010 

Source: USITC staff calculations, GTAP framework, TRAINS database.  aThe extent of tariff preferences has been calculated as the percent difference between the power of MFN tariffs and the power of preferential tariffs fo

2010. According to standard GTAP notation, the power of a tariff is 1 plus the tariff rate. 

11-17 
11-18

In the absence of Brazil’s tariff preferences, the simulated effects show that overall 

exports of Brazilian food and agricultural products to the world would have declined by 

$356–$378 million (about 1 percent) in value (table 11.10). Despite the simulated overall 

decline in the value of Brazilian food and agricultural exports, exports of some products 

would have expanded in value because of the increased availability of important inputs. 

For example, exports of poultry products would have increased (table 11.10) because of 

increased availability of feed. 

An alternative simulation removed Brazil’s bilateral food and agricultural tariff 

preferences while preferences for manufactures remained in place. This simulation 

showed that in the absence of those preferences, U.S. food and agricultural exports to the 

world would have increased by $121–$148 million, or 0.1 percent. Thus the simulated 

effects show that in the absence of Brazil’s food and agricultural tariff preferences, the 

value of global U.S. food and agricultural exports would have increased, whereas in the 

absence of Brazilian preferences for all products (that is food, agriculture and 

manufactures), the value of global U.S. food and agricultural exports would have 

declined. 

 
11-19

Bibliography 

U.S. International Trade Commission (USITC). China’s Agricultural Trade: Competitive Conditions and 

Effects on U.S. Exports. USITC Publication 4219. Washington, DC: USITC, March 2011. 

United Nations Conference on Trade and Development (UNCTAD). Trade Analysis Information System 

(TRAINS) database (accessed June 1, 2011). 

United Nations Statistics Division (UNSD). Commodity Trade (Comtrade) database (accessed June 1, 

2011). 

APPENDIX A

REQUEST LETTERS

A-3
A-4
A-5

APPENDIX B 

FEDERAL REGISTER NOTICE 

 

B-3 

 Federal Register / Vol. 76, No. 100 / Tuesday, May 24, 2011 / Notices 30195 

INTERNATIONAL TRADE 

COMMISSION 

[Investigation No. 332–524] 

Brazil: Competitive Factors in 

Brazil Affecting U.S. and 

Brazilian Agricultural Sales in 

Selected Third Country Markets; 

Institution of Investigation and 

Scheduling of Hearing 

AGENCY: United States International 

Trade Commission. 

ACTION: Notice. 

SUMMARY: Following receipt on April 

26, 2011, of a request from the United 

States Senate Committee on Finance 

(Committee) under section 332(g) of 

the Tariff Act of 1930 (19 U.S.C. 

1332(g)), the U.S. International Trade 

Commission (Commission) instituted 

investigation No. 332–524, Brazil: 

Competitive Factors in Brazil Affecting 

U.S. and Brazilian Agricultural Sales 

in Selected Third Country Markets. 

DATES: 

June 24, 2011: Deadline for filing 

 requests to appear at the public 

 hearing. 

July 5, 2011: Deadline for filing 

 prehearing briefs and statements. 

July 20, 2011: Public hearing. 

July 27, 2011: Deadline for filing 

 posthearing briefs and statements. 

October 6, 2011: Deadline for filing all 

 other written submissions. 

March 26, 2012: Transmittal of 

 Commission report to the 

 Committee. 

ADDRESSES: All Commission offices, 

including the Commission’s hearing 

rooms, are located in the United States 

International Trade Commission 

Building, 500 E Street, SW., 

Washington, DC. All written 

submissions should be addressed to the 

Secretary, United States International 

Trade Commission, 500 E Street, SW., 

Washington, DC 20436. The public 

record for this investigation may be 

viewed on the Commission’s electronic 

docket (EDIS) at http://www.usitc.gov/ 

secretary/edis.htm. 

FOR FURTHER INFORMATION 

CONTACT: 

Project leader John Fry (202–708–4157 

or john.fry@usitc.gov) or deputy 

project leader Brendan Lynch (202–

205–3313 or brendan.lynch@usitc.gov) 

for information specific to this 

investigation. For information on the 

legal aspects of this investigation, 

contact William Gearhart of the 

Commission’s Office of the General 

Counsel (202–205–3091 or 

william.gearhart@usitc.gov). The 

media should contact Margaret 

O’Laughlin, Office of External 

Relations (202–205–1819 or 

margaret.olaughlin@usitc.gov). 

Hearing-impaired individuals may 

obtain information on this matter by 

contacting the Commission’s TDD 

terminal at 202–205–1810. General 

information concerning the 

Commission may also be obtained by 

accessing its Internet server 

(http://www.usitc.gov). Persons with 

mobility impairments who will need 

special assistance in gaining access to 

the Commission should contact the 

Office of the Secretary at 202–205–

2000. 

 Background: As requested by the 

Committee, the Commission will 

conduct an investigation and prepare a 

report on the competitive factors in 

Brazil affecting U.S. and Brazilian 

agricultural sales in third country 

markets. As requested, to the extent 

possible, the report will include— 

 1. An overview of agricultural 

markets in Brazil, including recent 

trends in production, consumption, and 

trade; 

 2. An overview of U.S. and 

Brazilian participation in global export 

markets for meat, grain, and oilseed 

products, particularly in the European 

Union, Russia, China, Japan, and 

markets with which Brazil has 

negotiated trade agreements; 

 3. A description of the competitive 

factors affecting the agricultural sector 

in Brazil, in such areas as costs of 

production, transportation and 

marketing infrastructure, technology, 

exchange rates, domestic support, and 

government programs related to 

agricultural markets; 

 4. A description of the growth of 

Brazilian multinational agribusiness 

firms and their effect on global food 

supply chains; 

 5. A description of the principal 

trade measures affecting U.S. and 

Brazilian exports of meat, grain, and 

oilseed products in major third country 

export markets, including sanitary and 

phytosanitary measures and technical 

barriers to trade; and 

 6. A quantitative analysis of the 

economic effects of preferential tariffs 

negotiated under Brazil’s free trade 

agreements on U.S. and Brazilian 

exports of meat, grain, and oilseed 

products, as well as the economic 

effects of selected non-tariff measures 

on U.S. and Brazilian exports of meat, 

grain, and oilseed products in major 

third country export markets. 

 The Committee asked that the 

Commission’s report cover the period 

2006–2010, and focus on the global 

meat, grains, and oilseeds markets. The 

Committee requested that the 

Commission deliver its report by 

March 26, 2012. 

 Public Hearing: The Commission 

will hold a public hearing in connection 

with this investigation at the U.S. 

International Trade Commission 

Building, 500 E Street, SW., 

Washington, DC, beginning at 

9:30 a.m. on Wednesday, July 20, 

2011. Requests to appear at the public 

hearing should be filed with the 

Secretary no later than 5:15 p.m., 

June 24, 2011, in accordance with the 

requirements in the ‘‘Submissions’’ 

section below. All prehearing briefs 

and statements should be filed with the 

Secretary not later than 5:15 p.m., 

July 5, 2011; and all posthearing briefs 

and statements responding to matters 

raised at the hearing should be filed 

with the Secretary not later than 5:15 

p.m., July 27, 2011. All hearing-related 

briefs and statements should be filed in 

accordance with the requirements for 

filing written submissions set out 

below. In the event that, as of the close 

of business on June 24, 2011, no 

witnesses are scheduled to appear at the 

hearing, the hearing will be canceled. 

Any person interested in attending the 

hearing as an observer or onparticipant 

may call the Office of the Secretary 

(202–205–2000) after June 24, 2011, 

for information concerning whether the 

hearing will be held. 

 Written Submissions: In lieu of or in 

addition to participating in the hearing, 

interested parties are invited to file 

written submissions concerning this 

investigation. All written submissions 

should be addressed to the Secretary, 

and all such submissions (other than 

pre- and post-hearing briefs and 

statements) should be received not later 

than 5:15 p.m., October 6, 2011. All 
B-4 

30196 Federal Register / Vol. 76, No. 100 / Tuesday, May 24, 2011 / Notices 

written submissions must conform with 

the provisions of section 201.8 of the 

Commission’s Rules of Practice and 

Procedure (19 CFR 201.8). Section 201.8 

requires that a signed original (or a copy 

so designated) and fourteen (14) copies 

of each document be filed. In the event 

that confidential treatment of a 

document is requested, at least four (4) 

additional copies must be filed, in 

which the confidential information 

must be deleted (see the following 

paragraph for further information 

regarding confidential business 

information). The Commission’s rules 

authorize filing submissions with the 

Secretary by facsimile or electronic 

means only to the extent permitted by 

section 201.8 of the rules (see Handbook 

for Electronic Filing Procedures, http:// 

www.usitc.gov/secretary/ 

fed_reg_notices/rules/documents/ 

handbook_on_electronic_filing.pdf). 

Persons with questions regarding 

electronic filing should contact the 

Office of the Secretary (202–205–2000). 

 Any submissions that contain 

confidential business information must 

also conform with the requirements of 

section 201.6 of the Commission’s Rules 

of Practice and Procedure (19 CFR 201.6). 

Section 201.6 of the rules requires that the 

cover of the document and the individual 

pages be clearly marked as to whether they 

are the ‘‘confidential’’ or 

‘‘nonconfidential’’ version, and that the 

confidential business information be 

clearly identified by means of brackets. All 

written submissions, except for 

confidential business information, will 

be made available for inspection by 

interested parties. 

 In its request letter, the Committee 

stated that it intends to make the 

Commission’s report available to the 

public in its entirety, and asked that the 

Commission not include any 

confidential business information in the 

report it sends to the Committee. Any 

confidential business information 

received by the Commission in this 

investigation and used in preparing this 

report will not be published in a manner 

that would reveal the operations of the 

firm supplying the information. 

 By order of the Commission. 

 Issued: May 18, 2011. 

James R. Holbein, 

Secretary to the Commission. 

[FR Doc. 2011–12672 Filed 5–23–11; 8:45 

am] 

BILLING CODE 7020–02–P 
18862 Federal Register / Vol. 77, No. 60 / Wednesday, March 28, 2012 / Notices 

1A record of the Commissioners’ votes, the 

Commission’s statement on adequacy, and any 

individual Commissioner’s statements will be 

available from the Office of the Secretary and at the 

Commission’s Web site. 

2The Commission has found the responses 

submitted by domestic producers Carpenter 

Technology Corporation, Crucible Industries, LLC, 

Electralloy a G.O. Carlson Inc. Co., Universal 

Stainless & Alloy Products, Inc., and Valbruna 

Slater Stainless, Inc. to be individually adequate. 

Comments from other interested parties will not be 

accepted (see 19 CFR 207.62(d)(2)). 

1The motions were titled ‘‘Motion for 

Reconsideration—Opposition for Summary 

Disposition’’ and ‘‘Amended Motion for 

Reconsideration—Exceptions to Order of Summary 

Disposition.’’ 

assistance in gaining access to the 

Commission should contact the Office 

of the Secretary at 202–205–2000. 

General information concerning the 

Commission may also be obtained by 

accessing its Internet server (http:// 

www.usitc.gov). The public record for 

these reviews may be viewed on the 

Commission’s electronic docket (EDIS) 

at http://edis.usitc.gov. 

SUPPLEMENTARY INFORMATION: 

Background.—On March 5, 2012, the 

Commission determined that the 

domestic interested party group 

response to its notice of institution (76 

FR 74807, December 1, 2011) of the 

subject five-year reviews was adequate 

and that the respondent interested party 

group response was inadequate. The 

Commission did not find any other 

circumstances that would warrant 

conducting full reviews.1 Accordingly, 

the Commission determined that it 

would conduct expedited reviews 

pursuant to section 751(c)(3) of the Act. 

Staff report.—A staff report 

containing information concerning the 

subject matter of the reviews will be 

placed in the nonpublic record on May 

8, 2012, and made available to persons 

on the Administrative Protective Order 

service list for these reviews. A public 

version will be issued thereafter, 

pursuant to section 207.62(d)(4) of the 

Commission’s rules. 

Written submissions.—As provided in 

section 207.62(d) of the Commission’s 

rules, interested parties that are parties 

to the reviews and that have provided 

individually adequate responses to the 

notice of institution,2 and any party 

other than an interested party to the 

reviews may file written comments with 

the Secretary on what determinations 

the Commission should reach in the 

reviews. Comments are due on or before 

May 11, 2012 and may not contain new 

factual information. Any person that is 

neither a party to the five-year reviews 

nor an interested party may submit a 

brief written statement (which shall not 

contain any new factual information) 

pertinent to the reviews by May 11, 

2012. However, should the Department 

of Commerce extend the time limit for 

its completion of the final results of its 

reviews, the deadline for comments 

(which may not contain new factual 

information) on Commerce’s final 

results is three business days after the 

issuance of Commerce’s results. If 

comments contain business proprietary 

information (BPI), they must conform 

with the requirements of sections 201.6, 

207.3, and 207.7 of the Commission’s 

rules. Please be aware that the 

Commission’s rules with respect to 

electronic filing have been amended. 

The amendments took effect on 

November 7, 2011. See 76 FR 61937 

(Oct. 6, 2011) and the newly revised 

Commission’s Handbook on E-Filing, 

available on the Commission’s Web site 

at http://edis.usitc.gov. 

In accordance with sections 201.16(c) 

and 207.3 of the rules, each document 

filed by a party to the reviews must be 

served on all other parties to the reviews 

(as identified by either the public or BPI 

service list), and a certificate of service 

must be timely filed. The Secretary will 

not accept a document for filing without 

a certificate of service. 

Determination.—The Commission has 

determined to exercise its authority to 

extend the reviews period by up to 90 

days pursuant to 19 U.S.C. 

1675(c)(5)(B). 

Authority: These reviews are being 

conducted under authority of title VII of the 

Tariff Act of 1930; this notice is published 

pursuant to section 207.62 of the 

Commission’s rules. 

By order of the Commission. 

Issued: March 22, 2012. 

James R. Holbein, 

Secretary to the Commission. 

[FR Doc. 2012–7345 Filed 3–27–12; 8:45 am] 

BILLING CODE 7020–02–P 

INTERNATIONAL TRADE 

COMMISSION 

[Investigation No. 332–524] 

Brazil: Competitive Factors Affecting 

U.S. and Brazilian Agricultural Sales in 

Selected Third Country Markets 

AGENCY: United States International 

Trade Commission. 

ACTION: Extension of date for 

transmitting report. 

SUMMARY: Following the receipt of a 

letter on March 22, 2012, from the 

Committee on Finance of the United 

States Senate (Committee), the 

Commission has extended to April 26, 

2012, the date for transmitting its report 

to the Committee in investigation No. 

332–524, Brazil: Competitive Factors In 

Brazil Affecting U.S. and Brazilian 

Agricultural Sales in Selected Third 

Country Markets. 

DATES: 

March 22, 2012: Receipt of the letter 

from the Committee. 

April 26, 2012: New date for 

transmitting the Commission’s report to 

the Committee. 

Backround 

The Commission published notice of 

institution of the investigation in the 

Federal Register on May 24, 2011 (76 

FR 30195). In its original notice of 

investigation, the Commission indicated 

that it would transmit its report to the 

Committee on March 26, 2012. The 

notice is also available on the 

Commission Web site at http:// 

www.usitc.gov. All other information 

about the investigation, including a 

description of the subject matter to be 

addressed, contact information, and 

Commission addresses, remains the 

same as in the original notice. The 

public record for this investigation may 

be viewed on the Commission’s 

electronic docket (EDIS) at http:// 

www.usitc.gov/secretary/edis.htm. 

By order of the Commission. 

Issued: March 23, 2012. 

James R. Holbein, 

Secretary to the Commission. 

[FR Doc. 2012–7472 Filed 3–27–12; 8:45 am] 

BILLING CODE 7020–02–P 

DEPARTMENT OF JUSTICE 

Drug Enforcement Administration 

[Docket No. 10–54] 

Zhiwei Lin, M.D.; Decision and Order 

On September 19, 2011, 

Administrative Law Judge (ALJ) 

Timothy D. Wing issued the attached 

recommended decision (also ALJ). 

Therein, the ALJ found that Respondent 

is currently without authority to 

dispense controlled substances in 

California, the State in which he 

practices medicine and holds his DEA 

Registration and therefore 

recommended that his registration be 

revoked. Thereafter, Respondent filed 

two motions 1 and the Government filed 

a response to the motions. Having 

reviewed the record in its entirety 

including the ALJ’s recommended 

decision and the various pleadings, I 

have decided to adopt the ALJ’s rulings, 

findings of fact, conclusions of law, and 


tkelley on DSK3SPTVN1PROD with NOTICES

B-5

APPENDIX C 

Summary of Views of Interested Parties 
 
C-3 

Summary of Views of Interested Parties 

In the Commission’s institution notice for this investigation, interested parties were 

invited to file written submissions. This appendix summarizes the views expressed to the 

Commission and reflects the principal points made by a particular party. The views 

expressed in the summarized materials should be considered to be those of the submitting 

parties and not the Commissioners or Commission staff. In preparing this summary, 

Commission staff did not undertake to confirm the accuracy of, or otherwise correct, the 

information summarized. For the full text of the written submissions, see entries 

associated with investigation 332-524 at the Commission’s Electronic Docket 

Information System (http://edis.usitc.gov/). 

Association of Brazilian Beef Exporters (ABIEC)1

In a written submission, the Association of Brazilian Beef Exporters (ABIEC), which 

states that its members account for the majority of beef exported from Brazil, provided 

information on Brazil’s beef production and exports. ABIEC noted that although the 

cattle herd in Brazil was nearly twice the size of the U.S. herd, Brazil produces less beef 

than the United States. According to ABIEC, since 2006, Brazil has produced 

approximately 25 percent less beef than the United States from a cattle herd that is 86 

percent larger, due to both a lower reproduction rate in Brazil’s cattle herd and lower beef 

yield from individual animals. 

According to ABIEC, Brazil’s beef exports grew more rapidly than its production from 

2000 to 2006 because the average unit value of Brazil’s beef exports was lower than that 

of other major exporters such as Australia and the European Union, but since 2006, 

higher prices for Brazil’s beef exports have led to a decline in exports and an increase in 

domestic consumption. ABIEC asserts that the increased purchasing power of Brazil’s 

consumers has favored domestic consumption over exports and that future increases in 

Brazil’s population and per capita income will continue to keep production increases 

focused on the domestic market. 

ABIEC asserts that the Brazilian government provides no direct subsidies to cattle or beef 

producers or to beef exporters. According to ABIEC, Brazil’s government support for 

beef production is limited to the provision of below-market credit to small and mediumsized cattle producers in order to encourage long-term increases in productivity within the 

sector. Favorable credit terms are available to compensate these producers for what 

ABIEC describes as interest rates that are among the highest in the world. 

 1

 Association of Brazilian Beef Exporters, written submission to the USITC, December 16, 2011. 
C-4 

Blue Diamond Growers2

Blue Diamond Growers, a 100-year-old nonprofit marketing cooperative composed of 

almond growers, provided a written statement outlining its trading relationship with 

Brazil. In its statement, Blue Diamond also identified itself as the world’s largest 

processor and marketer of almonds and noted that in the United States almonds are 

commercially grown almost exclusively in California and constitute the number one 

agricultural export from that state—about $2 billion in 2010. 

In its written statement, Blue Diamond identified Brazil as a large global producer of 

Brazil nuts and cashews, but not of almonds. In light of the continued strong growth of 

the Brazilian economy, Blue Diamond depicted Brazil as a small, but growing, almond 

consumer market, which it ranks in its top 14 targeted markets. The cooperative projected 

that annual almond consumption in Brazil could grow approximately 7.3 percent over the 

next five years, particularly for snacking end uses. Blue Diamond noted that Brazilian 

applied tariffs on almonds currently range from 10 percent for in-shell and shelled raw 

almonds to 14 percent for prepared and preserved almonds. Blue Diamond asserted that 

the removal of the current Brazilian duties on U.S. almonds would boost U.S. exports 

further and encouraged the U.S. government to pursue this result. 

National Farmers Union (NFU) and United States 

Cattlemen’s Association (USCA)3

In a joint written submission, the National Farmers Union (NFU), which described itself 

as a national organization representing 250,000 farm, ranch, and rural resident members 

across the country, and the United States Cattlemen’s Association (USCA), which 

described itself as a national association of cattle ranchers with a mission to present an 

effective voice for the U.S. cattle industry, provided comments focusing on the 

competitive factors affecting U.S. and Brazilian exports of cattle and beef products. 

The submission noted that Brazil is the world’s number one exporter of beef and the 

second largest cattle producer, and asserted that U.S. producers face competition with 

Brazilian products in markets around the world. The U.S. cattle herd has shrunk since 

2006, while the Brazilian cattle herd has increased, although Brazil exports many more 

cattle than it imports and the United States imports many more cattle than it exports. The 

submission asserts that while Brazil’s beef consumption is growing, the Brazilian cattle 

industry continues to be more export-oriented than the U.S. industry. 

The submission states that these trends are likely to intensify in the coming years due to 

aggressive government support programs for Brazil’s cattle herd launched in 2011. 

According to their submission, these programs seek to increase the size of Brazil’s herd 

 2

 Blue Diamond Growers, written submission to the USITC, October 6, 2011. 3

 National Farmers Union and United States Cattlemen’s Association, written submission to the 

USITC, October 13, 2011. 
C-5 

and improve its quality, recover pastureland, and raise production levels. In addition, 

NFU and USCA state that the Brazilian government has implemented a new program in 

2011 to subsidize exports of Brazilian goods, including beef. 

The submission also stated that because Brazil is home to some of the largest 

multinational beef companies in the world, including JBS, Marfrig, and Brasil Foods, as 

these companies expand, their global presence will facilitate increased beef exports from 

Brazil. While both the United States and Brazil face nontariff barriers in many export 

markets, recognition of disease-free areas on a subnational basis by third-country markets 

may assist Brazil in overcoming barriers related to foot-and-mouth disease (FMD). NFU 

and USCA state that no such regionalization route appears to be available to U.S. 

exporters facing barriers related to bovine spongiform encephalopathy (BSE). 

The joint submission states that while Brazil produces more cattle than the United States, 

the U.S. industry produces more beef than Brazil, in part because U.S. producers are 

more efficient at meat extraction. The United States produced 12 million mt (carcass 

weight equivalent) of beef and veal in 2010, more than any other country, and Brazil was 

the second-largest producer, with 9.1 million mt produced in that year. NFU and USCA 

state that while the U.S. produces more beef than Brazil, Americans typically consume 

more beef than the U.S. industry produces. On the other hand, Brazil typically has excess 

beef production and exports its surplus. Therefore, Brazil is the world’s largest exporter 

and the United States is third. 

According to the submission, U.S. beef exports have been recovering in recent years as 

certain importing countries have eased the restrictions put into place when BSE was 

found in an animal in the United States in 2003. But U.S. exports have not recovered to 

their 2003 levels. By contrast, Brazil exported 34 percent more beef in 2010 than in 2003, 

and nearly 50 percent more than the United States. NFU and USCA state that Brazil and 

the United States compete in major beef markets around the world, noting that while the 

United States has performed better in Japan and China, Brazil outpaced the U.S. in 

exports to Europe and Russia. 

The submission notes that the Brazilian government stated in its World Trade 

Organization subsidy notifications for the 2004/05 and 2005/06 marketing years (MY) 

that it granted no export subsidies to the beef sector. It notes that those notifications list 

four programs that are claimed to be exempt from Brazil’s reduction commitments as 

rural development programs: low-interest loans and input subsidies to beef producers 

under the PRONAF program; funds for investments in equipment and animal services; 

and the rescheduling of producers’ debts under the PRONAF and PROCERA programs. 

The submission asserts that the total subsidy amounts under the four programs were 

$626 million in MY 2004/05 and $764 million in MY 2005/06. The notifications also list 

expenditures for disease control in cattle, marketing and promotion, and infrastructure 

that may benefit cattle producers as “green box” measures that are exempt from Brazil’s 

support commitments. 

NFU and USCA state that in Brazil’s Crop and Livestock Plan for MY 2011/12, the 

government announced a number of new programs that will confer significant benefits on 
C-6 

domestic cattle and beef producers. In total, according to the submission, the plan will 

spend more than R$107 billion ($67 billion) for Brazilian farmers and ranchers, and it is 

the first Brazilian plan to focus on improving cattle production as a core objective. The 

new programs include an increase in credit funding limits for livestock producers, the 

creation of a specific credit line for improving the genetic profile of Brazil’s cattle herd, 

low-interest loans (at annual rates of 6.25–6.75 percent) with repayment terms as long as 

5–8 years, and loans at annual rates of 5.5 percent and 15-year repayment periods for the 

integration of forest and livestock operations with management activities under Brazil’s 

Low Carbon Agriculture Program. In addition, under the REINTEGRA program, through 

the end of 2012, exporters of goods made in Brazil may receive a refund equal to 

3 percent of their export revenue. The submission further states that the Brazilian 

government has created an export financing fund, called FFEX, to be administered by the 

Banco do Brasil. FFEX will be given government capital totaling one billion reais

($574 million) and have an overall financing limit of R$209 billion ($120 billion). It 

notes that USDA predicts that Brazil’s new support programs will increase Brazil’s cattle 

inventories by three percent in 2012. 

NFU and USCA state that the Office of the United States Trade Representative has noted 

that major third country markets for beef, such as China, Japan, Korea, and Russia, limit 

U.S. beef exports due to concerns about BSE in a manner that does not comply with 

World Organisation for Animal Health (OIE) standards. Europe maintains restrictions on 

imports of beef from cattle raised with certain growth hormones, and Taiwan inspects 

shipments of U.S. beef for ractopamine, a drug used in some cattle. 

The submission states that Brazil also faces certain export restrictions, particularly with 

regards to FMD. However, the United States recently recognized the state of Santa 

Catarina as an FMD-free region within Brazil, and Brazil hopes that other markets will 

recognize the state as FMD-free in the future. The Brazilian government has also taken a 

number of steps, including a domestic traceability program, to help producers gain access 

to the European market. 
APPENDIX D 

Brazilian Agribusiness Additional 

Information 

D-3 

TABLE D.1 Selected agribusiness companies in Brazil’s meat and grains industries, 2011Company 

Primary sector(s) 

Operating revenue (latest reported year) 

Headquarters location Employment Notes 

C. Vale Cooperativa Agroindustrial 

Grains, oilseeds, poultry 

$1.1 billion (2009) 

Paraná 5,420 employees Cooperative 

Copacol Poultry $643.2 million 

(2010) 

Paraná 6,649 employees Cooperative 

Cooperativa Agroindustrial Lar 

Grains, poultry 

$792.4 million (2009) 

Paraná 8,600 employees Cooperative 

Imcopa Soybeans $519.9 million 

(2009) 

Araucaria, Paraná 

460 employees All non-GMO soybeans. 

Coopavel Agroindustrial Cooperativa 

Grains and oilseeds 

R$1.1 billion Cascavel, 

Paraná 

 Although Coopavel, an agricultural cooperat

of grains in Brazil, 60 percent of its gross revbeef, and dairy. The poultry is roughly 50 pepercent domestic sales. There are no pork eprimary competitors are foreign-based compBunge. 

COAMO Agroindustrial Cooperativa 

Soybeans, corn, wheat 

R$4.4 billion (2010), rising to R$5.4 billion (2011) 

Paranaguá, Paraná 

5,234 employees COAMO was founded in 1970, and is the lar

America, with almost 23,000 members. Storage capacity: 4.77 million tons. Exports Santos, and São Francisco; total exports of 

Cocamar Soybeans, 

grains, coffee, juice 

$705.1 million (2009) 

Maringa, Paraná 

2,020 employees Cocomar also owns a road/freight transport 

Transportes e Comercio Ltda). 

Foreign-based Rabobank Finance Netherlands Founded in the Netherlands as a rural credit 

Brazil in 1989, began commercial bank operoffering loans to farmers in 2004. 

Bunge Alimentos (Brazil unit) 

 $9.1 billion 

operating revenue (2009) 

United States 6,500 employees Globally for 2010, Bunge had operating reve

33,021 employees. 

Cargill Agrícola Grains and 

oilseeds 

$7.8 billion (2009) 

United States 26,622 

employees 

Globally for 2010, Cargill had sales revenue employment of 131,000 in 66 countries. 

ADM do Brasil Soybeans, 

corn, wheat 

Not reported United States Employees: 

2,075 

Globally for 2011, ADM reported operating r30,700 employees. 

See footnotes at end of table. 
D-4 

TABLE D.1 Selected agribusiness companies in Brazil’s meat and grains industries, 2011—ContinuedCompany 

Primary sector(s) 

Operating revenue (latest reported year) 

Headquarters location Employment Notes 

Louis Dreyfus Commodities Brasil 

Soybeans, cottonseeds, orange processing, coffee, sugar, and ethanol 

$2.4 billion (2010) 

France 18,000 

employees 

Tyson do Brasil Alimentos Ltda 

Poultry $138.3 million 

(2009) 

United States 3,000 employees Subsidiary of Tyson Foods Inc.; 107,000 em

Doux-Frangosul SA Poultry $966.1 million 

(2009) 

France 7,500 Subsidiary of Doux SA, which is controlled b

Glencore and Noble Glencore do Brasil Comercio e Exportação Ltda 

Trading $2.3 million 

(2009) 

United Kingdom 

 Glencore and Noble, a private firm, is a subs

International. The company produces, sourctransports, stores, finances, and supplies coalso mineral and energy) to industries arounoperating revenue for 2009 was $106.8 billio

Sources: Company Web sites; company reports, Bureau van Dijk, Orbis database; industry representatives, interviews with USITC staff, BSeptember, 2011; Poultry International, Brazil Meat Monitor, various issues. Notes: For nonpublic companies, data may be estimated. 

aNot available. 

 bCOAMO Web site, August 19, 2011. 
D-5 

TABLE D.2 Inbound FDI in Brazil's meat, oilseed, and grain sectors Date Investing company 

Source country Target company 

 Reported 

investment

value Type of investment Project description 

 Million $ 

8/9/11 Upravlyayushchaya 

Kompaniya Sodruzhestvo 

Russia Lider Armazens 

Gerais 

(a) Acquisition 100% A São Paulo-based grain stora

services provider. Lider will be Sodru, the joint-venture betweCAROL. Financial terms were acquisition allows Sodrugestvo capacity in the states of São PGoiás. 

7/7/11 EW Nutrition Gmbh Germany Grasp Indústria 

e Comércio 

(a) Acquisition 51% EW Nutrition has acquired a 5

Indústria e Comércio Ltda, a Panimal feed additive manufactuundisclosed consideration. 

6/10/11 Limagrain France Brasmilho 

Indústria e Comércio 

(a) Acquisition 100% Brasmilho acquired this Brazil-

soybean producer and distribuLage, following the signing of aFinancial terms were not discloincrease its market share in Brwithin 10 years. 

6/1/11 Cargill United 

States 

 13.0 Greenfield New laboratories area to serve 

beverage, baking, confectionedairy sectors. 

5/6/11 Mitsui & Co. Japan Multigrain (a) Acquisition 25% Mitsui acquired a 25% stake in 5/1/11 Mitsui & Co. Japan 100.0 Greenfield Agricultural commodities distrib

subsidiary of Mitsui (Japan), plexports at its Brazilian unit by 5company will add storage and to help meet its target of 3 mill

4/1/11 Chongqing Grain 

Group 

China 2,537.0 Greenfield The project includes an industr

soy, a fertilizer-processing unitlogistics system. It will crush 1have capacity to refine 300,00400,000 mt of soy. 

2/1/11 Cargill United 

States 

 210.0 Greenfield A new corn processing plant. 

2/1/11 Tereos France 136.0 Greenfield Corn processing plant in Brazi

produce starches and sweetencompany’s strength in the suga

See footnotes at end of table. 
D-6 

TABLE D.2 Inbound FDI in Brazil's meat, oilseed, and grain sectors—ContinuedDate Investing company 

Source country Target company 

 Reported 

investment

value Type of investment Project description 

 Million $ 

12/8/10 Upravlyayushchaya 

Kompaniya Sodruzhestvo 

Russia Carol-Sodru (a) Joint venture 100% Created a new company, nam

based in Brazil with a focus ofertilizer distribution. It is planand 31 fertilizer, seed, and agcenters in the states of São PGerais, and Tocantins, and thselection units and one crushcapacity of 1,250 mt. Sodrugmillion in the new company doperation and owns a 55% stwas also reported that Sodruthe remaining 45% stake in Cfew years. 

12/1/10 Stern-Wywiol 

Gruppe Holding 

Germany 72.0 Greenfield Manufacturing. 

Announced 9/13/2010 

LSI United 

States 

JBS and LSI’s Brazilian meat processing joint venture 

8/1/10 Grupo Bimbo Mexico 33.0 Greenfield Commercial baked goods. 7/26/10 Imerys France Pará Pigmentos 70.0 Acquisition 86.2% 5/1/10 Noble Group Hong Kong 150.0 Greenfield A new soy-crushing plant in M

operation was intended to proannually. The plant will be opeconstruction scheduled to com

1/11/10 Asociados Don 

Mario Semillas 

Argentina Brasmax 

Indústria Comércio Importação e Exportação 

(a) Acquisition 

increased from 76% to100% 

Asociados Don Mario Semillastake it did not own in BrasmaImportação e Exportação Ltdaseeds and grain farming servi

11/2/09 Nutreco Holding Netherlands Fri-Ribe (a) Acquisition 51% Nutreco Holding NV acquired 

Paulo-based animal feed manundisclosed sum. 

9/1/09 Grupo Bimbo Mexico 67.0 Greenfield Commercial baked goods. 5/1/09 Eurogerm France 3.0 Greenfield Bread-making improvers, tech

functional and nutritional cere

See footnotes at end of table. 
D-7 

TABLE D.2 Inbound FDI in Brazil's meat, oilseed, and grain sectors—ContinuedDate Investing company 

Source country Target company 

 Reported 

investment

value Type of investment Project description 

 Million $ 

10/15/08 Dow Agrosciences United 

States 

Coodetec (Cooperativa Central de Pesquisa Agrícola's corn seed production unit) 

(a) Acquisition 100% Dow AgroSciences, a U.S.-b

fertilizer manufacturer and deParacatu-based corn seed pa Paraná-based corn producnot been disclosed. 

Announced 9/18/08 

Tyson Foods Inc. United 

States 

Macedo Agroindustrial Ltda Avícola Itaiópolis Frangobras Indústria e Comércio de Carnes e Derivados Ltda 

(a) Acquisition 100% Tyson Foods Inc, a U.S.-bas

producer, signed an agreemeMacedo Agroindustrial Ltda, chicken products manufacturacquire the entire share capitAgroindustrial for an undiscloTyson Foods also agreed to capital of Avícola Itaiópolis, a chicken products manufactursum, and a 70% stake in FraComércio de Carnes e Derivbased chicken products manundisclosed sum. 

9/2/08 Kraft Foods United 

States 

K&S Alimentos 18.1 Joint venture 100% Sadia, a Brazilian poultry and 

company, and Kraft Foods Inproducer and marketer, signejoint venture. The new compaBrazil and was to focus on thretailing of cheese. The initiacompany was to be R$30 mi49% stake in the new compaa 51% stake. 

See footnotes at end of table. 
D-8 

TABLE D.2 Inbound FDI in Brazil's meat, oilseed, and grain sectors—ContinuedDate Investing company 

Source country Target company 

 Reported 

investment

value Type of investment Project description 

 Million $ 

7/1/08 Cargill United 

States 

 70.0 Greenfield Cargill Agricola planned to in

increase the corn-processing facilities in Uberlândia, Brazilraise production levels of staother food ingredients. 

Announced 6/24/2008 

Banco UBS Pactual Brazil Sementes 

Selecta 

(a) Acquisition 100% Grupo Los Grobo (Argentina

UBS Pactual (Brazil), annouSementes Selecta, a Goiás-bproduces soybeans, by-prodoperation was to include soyand soybean industrialization 

6/16/08 Evialis France Cargill Nutrição 

Animal Ltda's pet food manufacturing operations 

(a) Acquisition 100% Evialis, a France-based anim

to acquire Cargill's Brazilian afrom Cargill Nutrição Animal animal food for horses, sheedairy and beef cattle manufasum. 

4/1/08 NutraCea United 

States 

 50.0 Greenfield Manufacturing. 

2/22/08 NutraCea United 

States 

Irgovel, Indústria Riograndense de Óleos Vegetais 

19.4 Acquisition 100% NutraCea, a Phoenix-based 

dietary supplement developmacquired Irgovel, a Pelotas-bmanufacturer. 

1/1/08 Novus 

International 

United States 

 50.0 Greenfield First animal feed input plant. 

10/22/07 Evialis France Zoofort 

Suplementação Animal Indústria e Comércio 

(a) Acquisition 80% Evialis, a Saint-Nolff Cedex-b

manufacturer acquired a stakSuplementação, its Brazilian 

9/11/07 Monsanto Company United 

States 

Agroeste Sul Sementes 

100.0 Acquisition 100% Monsanto Company acquired 

manufacturer and wholesaleagreement, Monsanto also abusinesses, including its corn 

See footnotes at end of table. 
D-9 

TABLE D.2 Inbound FDI in Brazil's meat, oilseed, and grain sectors—ContinuedDate Investing company 

Source country Target company 

 Reported 

investment

value Type of investment Project description 

 Million $ 

7/27/07 Dawn Farm Foods Ireland Minerva Dawn 

Farms Indústria e Comércio de Proteínas 

(a) Joint venture 100% Minerva announced that it ha

based meat products manufaMinerva Dawn Farms IndústrProteínas, with Dawn Farms hold a 50% stake in the joint invest up to R$3 million. 

Announced 6/25/2007 

Perdigão Comércio e Indústria 

Brazil Unilever and 

Perdigão’s Management Services Joint Venture 

(a) Joint venture 100% Unilever NV, a Rotterdam-ba

Perdigão Comércio e Indústrpoultry and pig farming and scompany, announced that thventure. The new company wand Becel proactive heart-heUnder the terms of the agreesell its Doriana, Delicata and brands, together with manufaPerdigão. 

5/1/07 Australian Wheat 

Board 

Australia 15.0 Greenfield Australian Wheat Board inve

silos in Brazil as part of its ex

2/22/07 Marubeni 

Corporation 

Japan Agrenco BioEnergia 120.0 Joint venture 100% Marubeni, Japan's fifth- large

Agrenco Group formed a BraThe new venture, Agrenco Bowned as 33.3% by Marubei Group. The joint venture wou$120 million and would own aproducing biodiesel fuel and 

1/1/07 Kaizen Korea 50.0 Greenfield Soybean processing plant. 8/24/06 CHS United 

States 

Multigrain (a) Joint venture 100% CHS, an American crop grow

holding company, and Multige Importação, a Brazilian graform a joint venture to be calspecialize in wholesale graindisclosed. 

See footnotes at end of table. 
D-10 

TABLE D.2 Inbound FDI in Brazil's meat, oilseed, and grain sectors—ContinuedDate Investing company 

Source country Target company 

 Reported 

investment

value Type of investment Project description 

 Million $ 

Announced July 2006 

Tyson Foods Inc. United 

States 

Globoaves and Tyson Foods Chicken Processing Joint Venture 

(a) Joint venture 

100% 

Globoaves Agro Avícola Ltdfarming company, and Tysopoultry products producer, aform a joint venture companthe new company was to speof poultry products. 

7/1/06 Kermira Group Finland 3 Greenfield Sales, marketing, and suppo

5/2/06 Cargill Inc. United 

States 

Vida Alimentos Olive Oil Brazil 

24.7 Acquisition 100% Cargill Inc., a U.S. fertilizer m

Vida Alimentos, a Brazilian o

7/19/05 Harvest Capital 

Asset Management (HCMA) 

United States 

Two Rivers Farm Project 

14.6 Minority stake 

unknown % 

HCMA has announced a privits north central Brazil-based to produce rice and soybeanprovided by U.S. institutionaHCAM also announced a routhe Two Rivers Farm project economies of scale on the fu

farm were expected to allow global low-cost commodity p

7/1/05 Cobb-Vantress United 

States 

 14.0 Greenfield This new chicken-farm comp

expected to be the biggest in 

4/14/05 Archer Daniels 

Midland Company 

United States 

Molinos Rio de La Plata and ADM Company's edible oil joint venture 

(a) Joint venture 

100% 

Argentina-based Molinos Rio venture with ADM to enter thbusiness in Brazil. Molinos dventure because ADM alreaestablished there. The ventADM's Campo Grande plant

2/3/05 Mr. Terry Johnson United 

Kingdom 

Frigoclass Promissão-SP 

8.0 Acquisition 100% British businessman Terry Jo

Promissão-based unit of Frigprocessing business. 

2/1/05 Provimi Netherlands 50.0 Greenfield Pet food. 1/1/05 Bunge United 

States 

 88.0 Greenfield Bunge planned to build a ve

capacity of 1,000 mt and 1,2plant for cottonseed fiber, m

See footnotes at end of table. 
D-11 

TABLE D.2 Inbound FDI in Brazil's meat, oilseed, and grain sectors—ContinuedDate Investing company 

Source country Target company 

 Reported 

investment

value Type of investment Project description 

 Million $ 

10/29/04 Cargill Fertilizer United 

States 

Seara Alimentos 130.0 Acquisition 

unknown stake 

Cargill sold Seara to Marfrig 

10/6/04 Cargill United 

States 

Smucker do Brasil 

(a) Acquisition 100% Cargill acquired JM Smucke

8/1/04 Cargill United 

States 

 17.0 Greenfield Storage facilities. 

8/1/04 Cargill United 

States 

 15.0 Greenfield Oil factory. 

8/1/04 Cargill United 

States 

 50.0 Greenfield Double the production capac

processing plant in the coun

7/1/04 Ajinomoto Japan 86.0 Greenfield Manufacturing. 4/1/04 Bunge United 

States 

 144.0 Greenfield Expand production of its soy

4,000 tons per day. 

1/1/04 Huaken Cereal 

& Oil 

China 3.0 Greenfield Open an office to negotiate g

11/1/03 Cargill United 

States 

 10.0 Greenfield Joint venture for production 

vegetable oils for various ind

9/1/03 Bunge United 

States 

 50.0 Greenfield 100,000 mt/year wheat flour 

9/1/03 Rhodia France 500.0 Greenfield Increase its food ingredients 

mt/month from the current 10 

8/1/03 Global Grain Canada 50.0 Greenfield Expand production from 750 

to 1,300 million tons of groun

4/1/03 Florentz France 17.0 Greenfield Double the capacity of its so

Ponta Grossa 

4/1/03 Florentz France 35.0 Greenfield Build a soybean crushing un

would increase its total capathan 10,000 mt of grain a da

4/1/03 Florentz France 17.0 Greenfield Double capacity of soybean 1/1/03 Archer Daniels 

Midland 

United States 

 50.0 Greenfield Double soybean crush capa

1/1/03 Cargill United 

States 

 40.0 Greenfield Build soybean crushing plan

per day. 

1/1/03 Cargill United 

States 

 20.0 Greenfield Build soybean crushing plan

per day. 

Sources: Financial Times, fDiMarkets database, Bureau van Dijk, Zephyr database. Note: Investment values are estimated when official values are not released. 

aNot available. 
D-12 

TABLE D.3 Outbound FDI by Brazilian meat, grains, and oilseeds companies Date Investing company 

Destination country Target company 

 Investment

value Type of investment Project details 

 Million $ 

2/1/2010 Minerva Paraguay 34.1 Greenfield Minerva's affiliate, Ganadera

feedlot operations and on asmaterial supply chain at the 

12/17/2009 Camil Alimentos Chile Empresas 

Tucapel 

(a) Acquisition 100% Camil Alimentos SA acquire

Santiago-based rice milling sundisclosed sum. 

11/1/2009 JBS Russia 136.8 Greenfield In a joint venture with Cremo

invest in a manufacturing plaentity, Inalca JBS, would havcapacity of 25,000 mt of hamsupply frozen hamburgers to restaurants in Russia. 

11/3/2008 Marfrig United 

Kingdom 

Kitchen Range Foods 

900.0 Acquisition Marfrig acquired the Brazil a

(United States), including 15 

for further processed and indpoultry slaughtering, in a traestimated $680 million. The products manufacturer Braspoultry processor Penasul Aprocessor Agrofrango IndústAlimentos. In Europe, MarfriOSI's Moy Park Ltd of Craigafacilities in Northern Ireland, Netherlands. The transaction Kitchen Range Foods Ltd anof the Netherlands. The conscash payment of $270 milliodebt, and 20.1 million OSI sh

11/1/2008 Marfrig United 

Kingdom 

 3.2 Greenfield Moy Park planned to invest £

Ireland processing site. Invelatest frying and fast chilling available energy-efficient tec

10/23/2008 JBS United 

States 

Smithfield Beef Group 

565.0 Acquisition 100% JBS acquired Smithfield Bee

based beef processor, from acquisition was to include FiFeeding, a joint venture then Beef and Continental Grain Cacquired National Beef PackGroup, and was conducting private placement. 

See footnotes at end of table. 
D-13 

TABLE D.3 Outbound FDI by Brazilian meat, grains, and oilseeds companies—Continued

Date Investing company 

Destination country Target company 

 Investment

value Type of investment Project details 

 Million $ 

10/1/2008 Marfrig France 13.4 Greenfield Marfrig planned to invest €6 

in France. Products consistebacon, sausages, beef cubesteaks. 

8/6/2008 Minerva Paraguay Friasa (a) Acquisition 70% Minerva acquired a 70 per c

based meat products manuf

7/1/2008 JBS Argentina 26.9 Greenfield JBS reopened a beef-proces

province. 

6/1/2008 Sadia Austria 28.8 Greenfield Sadia selected Vienna as its 5/23/2008 JBS and Cremonini Italy Inalca 346.7 Minority stake 

48.6% 

Cremonini and JBS signed astrategic alliance. The first pJBS paying €150 million to sInalca. In the second phase, €52.5 million, and Cremoninsubscribe to more new shareCommission approved the trtransaction, JBS acquired shstake in Inalca from CremonCremonini and JBS each owwhich was renamed Inalca Jwas expected to let Inalca acin Europe, Russia, and Afric

1/31/2008 Perdigão Comércio 

e Indústria 

Netherlands Plusfood Groep 44.3 Acquisition 100% Plusfood Groep, with approx

the time, manufactures poultproducts and owns two Eurohamburgers and Friki for poucompany had an installed caof approximately 20,000 tonsThe takeover process was ethe first Brazilian company in European-based industrial o

See footnotes at end of table. 
D-14 

TABLE D.3 Outbound FDI by Brazilian meat, grains, and oilseeds companies—Continued

Date Investing company 

Destination country Target company 

 Investment

value Type of investment Project details 

 Million $ 

12/3/2007 Argentine Breeders 

& Packers SA and Marfrig Alimentos 

Argentina Quickfood SA 266.8 Acquisition Marfrig agreed to acquire a 7

Quickfood, an Argentinean fand also the entire share capColonia, an Uruguay-based manufacturer. Under the agsubsidiary, Argentine BreedeArgentinean animal slaughteservices company, also agreshare capital of Best Beef anArgentinean meat products m

11/30/2007 Camil Alimentos Uruguay SA Molinos 

Arroceros Nacionales 

110.0 Acquisition 100% The Brazilian rice and beans 

exportation company, Camil acquire the Uruguayan rice pMolinos Arroceros Nacionaletransaction was intended to main grain exporter in Mercoand to accelerate its growth. 

11/1/2007 Sadia United Arab 

Emirates (UAE) 

 57.2 Greenfield Sadia invested in a meat pro

UAE. The factory would procsupply regional demand. 

9/18/2007 Marfrig Chile Frigorifico 

Patagonia 

8.5 Acquisition 97.82% Marfrig, through one of its su

agreement to acquire Frigorbased lamb meat specialist c

7/25/2007 Marfrig Chile Quinto Cuarto 0.9 Acquisition 

increased from 50% to 100% 

Marfrig acquired the remaininmeat wholesaler Quinto Qua$850,000. 

7/12/2007 JBS United 

States 

Swift & Company 

1,425.0 Acquisition 100% In May 2007, JBS agreed to 

for $1.425 billion, Booth Creapproximately $1.2 billion in expenses. The strategic comwould create the world's lead

6/1/2007 Marfrig Uruguay Frigorífico La 

Caballada 

(a) Acquisition 100% Marfrig acquired the Urugua

Frigorífico La Caballada. 

See footnotes at end of table. 
D-15 

TABLE D.3 Outbound FDI by Brazilian meat, grains, and oilseeds companies—Continued

Date Investing company 

Destination country Target company 

 Investment

value Type of investment Project details 

 Million $ 

11/2/2006 Marfrig Uruguay Frigorífico Elbio 

Pérez Rodríguez 

(a) Acquisition 100% Marfrig acquired Uruguayan 

Frigorífico Elbio Pérez Rodríwere not disclosed. 

10/5/2006 Marfrig Argentina Tacuarembo 35.0 Acquisition 100% Marfrig acquired Tacuaremb

provider of meat processing 

9/5/2005 JBS Argentina Swift Armour 200.0 Acquisition 85.3% 8/1/2005 Perdigao Japan 5.1 Greenfield Opened a sales office to exp

Japan. 

6/1/2005 Sadia Russia 90.0 Greenfield Opening of the Sadia factory 

Initial capacity was 53,000 myear. 

Source: Financial Times, fDiMarkets database, Bureau van Dijk, Zephyr database. Note: Investment values are estimated when official values are not released.

APPENDIX E 

Modeling Framework and Assumptions 

E-3 

Simulation Framework 

In this study, an applied general equilibrium (AGE) global trade model is the basis of a 

quantitative analysis of the economic effects of preferential tariffs negotiated between 

Brazil and its Mercosul trading partners on U.S. and Brazilian exports of meat, grain, and 

oilseed products, as well as the economic effects of selected nontariff measures (NTMs) 

on U.S. and Brazilian exports of meat, grain, and oilseed products in major third-country 

export markets.1

The AGE model used has 50 sectors and 21 economies. Thirty-eight sectors represent 

food and agricultural products; the rest of the economy is represented by 12 sectors. In 

addition to the United States and Brazil, the model economies include Brazil’s trade 

partners in Mercosul, China, the European Union (EU-27), Japan, Korea, Russia, 

Australia, Canada, New Zealand, and a rest-of-the-world (ROW) region representing all 

other economies in the world. 

The Applied General Equilibrium Model 

The AGE model is derived from the Global Trade Analysis Project (GTAP) model of 

world trade. 2

 The GTAP framework consists of a simulation model and a database 

containing global data on international trade, together with interindustry relationships and 

national income accounts. In the GTAP model, domestic products and imports are 

consumed by firms, governments, and households. Product markets are assumed to be 

perfectly competitive, implying zero economic profits for firms. Imported products are 

viewed as imperfect substitutes for domestic products. Product prices are determined by 

market-clearing conditions that result in sectoral production equaling global demand. In 

addition to data on bilateral trade in each of the 50 sectors, the database includes data on 

domestic production and use for each sector, including intermediate use in the production 

of other commodities and services, as well as data on use of land, capital, and labor 

employment by sector. An additional component of the data is a set of parameters that, in 

the context of the model’s equations, determine economic behavior. These parameters are 

principally a set of elasticities that determine, among other things, the extent to which 

imports and domestically produced goods are substitutes for one another. 

The product and sector definitions in the database used in this report are different from 

those in the GTAP database. Several standard GTAP sectors in food and agriculture were 

disaggregated to identify the meat, grain, and oilseed products that are the focus of this 

report.3

 The product disaggregation was based on trade statistics from the United Nations 

 1

 Mercosul is discussed in more detail in chapter 2. For the purpose of the modeling simulations, the 

Commission has defined Mercosul as all current Mercosul members, associate members, and observers. In 

addition to Brazil, these include Argentina, Paraguay, Uruguay, Bolivia, Chile, Colombia, Ecuador, Mexico, 

Peru, and Venezuela. 2

 For more information about the GTAP model, see Hertel, Global Trade Analysis: Modeling and 

Applications, 1997; Narayanan and Walmsley, Global Trade, Assistance, and Production: The GTAP 7 Data 

Base, 2008. 

3

 To disaggregate products, two computer programs developed by Mark Horridge (Centre of Policy 

Studies, Monash University, Melbourne, Australia) were used: “SplitCom: Programs to Disaggregate a 

GTAP Sector,” November 2005; and “GTAPAdjust: A Program to Balance or Adjust a GTAP Database,” 

March 2011. 
E-4 

Commodity Trade Statistics (UN Comtrade) database and the Global Trade Information 

Services (GTIS) database for 2010, and production and consumption statistics from the 

FAOSTAT databases of the Food and Agriculture Organization of the United Nations 

(FAO).

Table E.1 lists the 21 economies that are identified in the AGE simulation model. In 

addition to the United States and Brazil, the simulation model identifies Brazil’s 10 

Mercosul trade partners, 5 large third-country markets (the EU-27, Japan, Korea, Russia, 

and China), and other significant agricultural producing economies. 

TABLE E.1 Regions used in applied general equilibrium simulation model 

1 United States of America 12 Mexico 

2 Brazil 13 EU-27 

3 Argentina 14 Japan 

4 Paraguay 15 Russia 

5 Uruguay 16 China 

6 Bolivia 17 Korea 

7 Chile 18 Australia 

8 Colombia 19 New Zealand 

9 Ecuador 20 Canada 

10 Peru 21 Rest of the world (ROW) 

11 Venezuela 

Sources: USITC staff; Hertel, Global Trade Analysis, January 1997; Narayanan and Walmsley, Global Trade, 

Assistance, and Production, 2008. 

Table E.2 lists the 50 sectors in the simulation model. Sector numbers 1 to 38 in table E.2 

represent agricultural and food sectors. As noted, the rest of the economy is represented 

by 12 sectors. Table E.3 specifies the HS 6-digit categories that have been aggregated 

into each one of 36 food and agricultural sectors in the simulation model. Model sectors 

“Dairy farming” and “Beverages and tobacco products” are not included in table E.3 

because they have not been modified from their representation in the GTAP database. 

The land use statistics in the standard GTAP database were also modified for this report. 

In the standard GTAP database, various producing sectors compete for a single type of 

land endowment. The database used in this report identifies several types of land 

endowments. These land classifications are based on agroecological considerations. In 

particular, land was disaggregated into 18 agroecological zones (AEZs).4

 These AEZs 

cover six different lengths of growing period spread over three different climate zones. 

Land-using activities include crop production, cattle, and forestry. Land is mobile (i.e., 

can be reassigned to different uses) between crop, livestock, and forestry sectors within 

the same AEZ. The total endowment of each AEZ land type is fixed—that is, land is not 

assumed to be mobile across AEZs. 

 4

 The data source is Lee, Hertel, Sohngen, and Ramankutty, “Towards An Integrated Land Use Data 

Base for Assessing the Potential for Greenhouse Gas Mitigation,” GTAP Technical Paper No.25, December 

2005. 
E-5 

TABLE E.2 Sectors in the applied general equilibrium simulation model 

1 Paddy rice 26 Poultry, pieces and offal 

2 Wheat 27 Prepared poultry 

3 Corn 28 Sausage 

4 Other grains 29 Animal fats, other edible animal products. 

5 Vegetables, fruits, nuts 30 Soymeal 

6 Soybeans 31 Soybean oil 

7 Other oilseeds 32 Other vegetable oils and fats 

8 Sugar cane, sugar beets 33 Dairy products 

9 Plant-based fibers 34 Processed rice 

10 Crops n.e.c. 35 Sugar manufacturing 

11 Cattle 36 Processed, preserved agric. food products. 

12 Swine 37 Frozen, prepared or preserved fish products. 

13 Live poultry 38 Beverages and tobacco products 

14 Eggs 39 Forestry 

15 Other live animals 40 Fishing 

16 Hides, skins, other nonedible animal products. 41 Mining 

17 Dairy farming 42 Textiles 

18 Wool and silk 43 Wearing apparel 

19 Beef meat 44 Leather products 

20 Beef offal 45 Petroleum and coal products. 

21 Processed beef 46 Chemical, rubber, plastic products. 

22 Pork meat 47 Manufactures n.e.c. 

23 Pork offal 48 Retail and wholesale trade 

24 Processed pork 49 Utilities 

25 Poultry, whole birds 50 Services n.e.c. 

Sources: U.S. International Trade Commission staff; Hertel, Global Trade Analysis, January 1997; Narayanan and 

Walmsley, Global Trade, Assistance, and Production, 2008. 

Note: The acronym n.e.c. means not elsewhere classified. 

TABLE E.3 Concordance between food and agricultural products in the simulation model and the HS 6-digit items contained in each 

product group 

Product in simulation model HS 6-digit items 

Paddy rice 100610, 100620 

Wheat 100110, 100190 

Corn 100510, 100590 

Other grains 100200, 100300, 100400, 100700, 100810, 100820, 100830, 100890 

Vegetables, fruits, nuts 

070110, 070190, 070200, 070310, 070320, 070390, 070410, 070420, 070490, 070511, 070519, 

070521, 070529, 070610, 070690, 070700, 070810, 070820, 070890, 070920, 070930, 070940, 

070951, 070959, 070960, 070970, 070990, 071310, 071320, 071331, 071332, 071333, 071339, 

071340, 071350, 071390, 071410, 071420, 071490, 080111, 080119, 080121, 080122, 080131, 

080132, 080211, 080212, 080221, 080222, 080231, 080232, 080240, 080250, 080260, 080290, 

080300, 080410, 080420, 080430, 080440, 080450, 080510, 080520, 080540, 080550, 080590, 

080610, 080620, 080711, 080719, 080720, 080810, 080820, 080910, 080920, 080930, 080940, 

081010, 081020, 081040, 081050, 081060, 081090, 081310, 081320, 081330, 081340, 081350 

Soybeans 120100 

Other oilseeds 120210, 120220, 120300, 120400, 120510, 120590, 120600, 120720, 120740, 120750, 120791, 

120799 

Sugar cane, sugar beets 121291 

Plant fibers 140420, 520100, 530110, 530210, 530310, 530500 

 
E-6 

TABLE E.3 Concordance between food and agricultural products in the simulation model and the HS 6-digit items contained in each 

product group—Continued

Product in simulation model HS 6-digit items 

Crops n.e.c. 

060110, 060120, 060210, 060220, 060230, 060240, 060290, 060311, 060312, 060313, 060314, 

060319, 060390, 090111, 090220, 090240, 090300, 090411, 090412, 090420, 090500, 090611, 

090619, 090620, 090700, 090810, 090820, 090830, 090910, 090920, 090930, 090940, 090950, 

091010, 091020, 091030, 091091, 091099, 120910, 120921, 120922, 120923, 120924, 120925, 

120929, 120930, 120991, 120999, 121010, 121020, 121120, 121130, 121140, 121190, 121299, 

121300, 121410, 121490, 180100, 230800, 240110, 240120, 240130 

Cattle 010210, 010290, 051110 

Swine 010310, 010391, 010392 

Live poultry 010511, 010512, 010519, 010594, 010599 

Eggs 040700 

Other live animals 010110, 010190, 010410, 010420, 010611, 010612, 010619, 010620, 010631, 010632, 010639, 

010690, 030760 

Hides, skins and other nonedible animal products 

050210, 050290, 050400, 050510, 050590, 050610, 050690, 050710, 050790, 051000, 051199, 

152190, 410120, 410150, 410190, 410210, 410221, 410229, 410320, 410330, 410390, 430110, 

430130, 430160, 430180, 430190 

Wool and silk 500100, 510111, 510119, 510211, 510219, 510220 

Beef meat 020110, 020120, 020130, 020210, 020220, 020230 

Beef offal 020610, 020621, 020622, 020629 

Processed beef 021020, 160250 

Pork meat 020311, 020312, 020319, 020321, 020322, 020329 

Pork offal 020630, 020641, 020649 

Processed pork 021011, 021012, 021019, 160241, 160242, 160249 

Poultry, whole birds 020711, 020712, 020724, 020725, 020732, 020733 

Poultry, pieces and offal 020713, 020714, 020726, 020727, 020734, 020735, 020736 

Preserved poultry 160231, 160232, 160239 

Sausage 160100 

Animal fats and other edible 

animal products 

020410, 020421, 020422, 020423, 020430, 020441, 020442, 020443, 020450, 020500, 020680, 

020690, 020810, 020830, 020840, 020850, 020890, 020900, 021091, 021092, 021093, 021099, 

040900, 041000, 150100, 150200, 150300, 150410, 150420, 150430, 150500, 150600, 160220, 

160290, 160300, 230110 

Soybean meal 120810, 230400 

Soybean oil 150710, 150790 

Other vegetable oils and fats 

120890, 150810, 150890, 150910, 150990, 151000, 151110, 151190, 151211, 151219, 151221, 

151229, 151311, 151319, 151321, 151329, 151411, 151419, 151491, 151499, 151511, 151519, 

151521, 151529, 151530, 151550, 151590, 151610, 151620, 151710, 151790, 152110, 152200, 

230500, 230610, 230620, 230630, 230641, 230649, 230650, 230660, 230690 

Dairy products 

040110, 040120, 040130, 040210, 040221, 040229, 040291, 040299, 040310, 040390, 040410, 

040490, 040510, 040520, 040590, 040610, 040620, 040630, 040640, 040690, 170211, 170219, 

210500, 350110 

Processed rice 100630, 100640 

Sugar manufacturing 170111, 170112, 170191, 170199, 170220, 170310, 170390 

 
E-7 

TABLE E.3 Concordance between food and agricultural products in the simulation model and the HS 6-digit items contained in each 

product group—Continued

Product in simulation model HS 6-digit items 

Processed and preserved 

agricultural food products 

040811, 040819, 040891, 040899, 051191, 071010, 071021, 071022, 071029, 071030, 071040, 

071080, 071090, 071120, 071140, 071151, 071159, 071190, 071220, 071231, 071232, 071233, 

071239, 071290, 081110, 081120, 081190, 081210, 081290, 081400, 090112, 090121, 090122, 

090190, 090210, 090230, 110100, 110210, 110220, 110290, 110311, 110313, 110319, 110320, 

110412, 110419, 110422, 110423, 110429, 110430, 110510, 110520, 110610, 110620, 110630, 

110811, 110812, 110813, 110814, 110819, 110820, 110900, 130211, 130212, 130213, 130219, 

130220, 130231, 130232, 130239, 160210, 170230, 170240, 170250, 170260, 170290, 170410, 

170490, 180200, 180310, 180320, 180400, 180500, 180610, 180620, 180631, 180632, 180690, 

190110, 190120, 190190, 190211, 190219, 190220, 190230, 190240, 190300, 190410, 190420, 

190430, 190490, 190510, 190520, 190531, 190532, 190540, 190590, 200110, 200190, 200210, 

200290, 200310, 200320, 200390, 200410, 200490, 200510, 200520, 200540, 200551, 200559, 

200560, 200570, 200580, 200591, 200599, 200600, 200710, 200791, 200799, 200811, 200819, 

200820, 200830, 200840, 200850, 200860, 200870, 200880, 200891, 200892, 200899, 200911, 

200912, 200919, 200921, 200929, 200931, 200939, 200941, 200949, 200950, 200961, 200969, 

200971, 200979, 200980, 200990, 210111, 210112, 210120, 210130, 210210, 210220, 210230, 

210310, 210320, 210330, 210390, 210410, 210420, 210610, 210690, 220900, 230210, 230230, 

230240, 230250, 230310, 230320, 230910, 230990, 350211, 350219, 350510 

Frozen, prepared or preserved 

fish products 

030270, 030311, 030319, 030321, 030322, 030329, 030331, 030332, 030333, 030339, 030341, 

030342, 030343, 030344, 030345, 030346, 030349, 030351, 030352, 030361, 030362, 030371, 

030372, 030373, 030374, 030375, 030376, 030377, 030378, 030379, 030380, 030411, 030412, 

030419, 030421, 030422, 030429, 030491, 030492, 030499, 030510, 030520, 030530, 030541, 

030542, 030549, 030551, 030559, 030561, 030562, 030563, 030569, 030611, 030612, 030613, 

030614, 030619, 030729, 030739, 030749, 030759, 030799, 160411, 160412, 160413, 160414, 

160415, 160416, 160419, 160420, 160430, 160510, 160520, 160530, 160540, 160590, 230120 

Source: Compiled by USITC staff. 

Notes: Model sectors “Dairy farming” and “Beverages and tobacco products” are not included in this table because they have not been 

modified from their representation in the GTAP database. The acronym n.e.c. means not elsewhere classified. 

The model simulations performed in this report reflect long-term adjustments in the 

markets for primary factors—land, labor, and capital. In the model, the availability of 

labor, in all economies, and of specific land resources in Brazil is responsive to real 

wages and real returns to land, respectively. Labor supply adjustments are based on a 

labor supply elasticity of 0.2.5

 Land availability in two agro-ecological zones (AEZ5 and 

AEZ6) in Brazil was allowed to expand because savannah and grassland could be 

brought into production. The availability of capital resources, in all economies, adjusts so 

that returns to capital do not change because of the simulation. 

The data used in the simulation framework have been updated from their 2007 base-year 

to 2010, the most recent year for which statistics are available, using statistics on trade 

and on gross domestic product for all economies in the model. 

The simulated effects are given in ranges which are calculated by performing sensitivity 

analysis of the simulated effects with respect to two key model parameters: the 

elasticities of substitution between domestic and imported products (GTAP parameter 

ESUBD) and between different suppliers of imports goods (GTAP parameter ESUBM). 

Values for ESUBM are based on Hertel, et al., which provides the mean ESUBM values 

used in the simulations, and the associated standard deviations for those values, which are 

 5

 Boeters and Savard, “The Labour Market in CGE Models,” 2011 suggest using the value of 0.2 in 

Ballard et al., “A General Equilibrium Model for Tax Policy Evaluation,” 1985 for the compensated elasticity. 
E-8 

employed in the sensitivity analysis. 6 ESUBD and ESUBM are held in a fixed 

relationship, the so-called “rule of two.”7

Brazil’s Preferential Tariffs 

In order to estimate the economic effects of Brazil’s negotiated free trade agreements, the 

analysis simulated the removal of the bilateral preferential tariffs between Brazil and its 

Mercosul trading partners. The analysis used 2010 bilateral applied preferential tariff 

rates and 2010 applied MFN rates for trade between Brazil and its Mercosul partners, 

downloaded from the United Nations Conference on Trade and Development’s Trade 

Analysis and Information System (TRAINS) database using World Integrated Trade 

Solution. The TRAINS database contains bilateral applied preferential tariff rates and 

applied MFN rates at the HS-6 subheading level. These tariff rates include the ad valorem 

equivalents of non-ad valorem tariffs. 8 Tariff rates were downloaded for all HS-6 

products and represent the average ad valorem equivalent applied to imports of a HS-6 

product.9

 In order to calculate tariffs applied on the products specified in the simulation 

model seen in table E.3, the HS-6 product tariff rates were aggregated by trade-weighting 

the tariffs rates using 2010 trade values. The economic effects of Brazil’s negotiated 

bilateral preferential tariffs were estimated by simulating the removal of these 

preferences. The simulation replaced the preferential tariff rates between Brazil and its 

Mercosul trading partners with applied most favored nation (MFN) rates. 

Nontariff Measures on U.S. and Brazilian Exports of Meats, Grains, 

and Oilseeds 

The USITC conducted a quantitative analysis of trade-restricting NTMs facing US and 

Brazilian exports of meat, grain, and oilseed products to certain major third-country 

export markets. The analysis assumes that NTMs raise the import price of goods and 

create a price gap between the import price and the world price. This price gap can be 

calculated and interpreted as the equivalent of a tariff. An analysis of the effects of NTMs 

on U.S. and Brazilian exports was performed by simulating the removal of the tariff 

equivalents for the products and markets where the existence of a trade-restricting 

measure could be confirmed by USITC staff research and industry information. As a 

result, exports of certain focus products were excluded from the analysis if the product 

was determined not to face any NTMs in a specific market. Table E.4 gives the full list of 

products and markets for which the analysis considered the existence of possible NTMs 

 6

 Hertel et al., “How Confident Can We Be in CGE-Based Assessments of Free Trade Agreements?” 

2004. 7

 Jomini, Watts, and Dee, The SALTER Model of the World Economy, 1994. 8

 For tariff lines including tariff-rate quotas (TRQs), TRAINS calculates the tariff as an average of the 

under quota and over quota rates, when available. When both the under quota and over quota rates are 

unavailable, the tariff rate is calculated as only the over quota rate. Specific rates are converted to ad valorem 

equivalents using the UNCTAD method 1 for calculating a reference price. For further details, see WITS, 

“Ad-Valorem Equivalents of non Ad-Valorem Tariffs”, 2010. 9

 The TRAINS database contains bilateral applied tariffs and MFN rates at the HS-6 level. The HS-6 

tariff rates are the simple average ad valorem equivalents of the HS-8 ad valorem equivalents contained in a 

HS-6 subheading. Preferential and MFN tariff rates were downloaded in June 2011 and reflect the latest 

available applied tariff rates for 2010 in the TRAINS database at the time of download. 
E-9 

TABLE E.4 Set of products and markets considered for the NTM simulation analysis 

 Third-country market 

Product China EU-27 Japan Korea Russia 

Wheat ✓ ✓ ✓ 

Corn ✓ ✓ ✓ 

Beef ✓ ✓ ✓ ✓ ✓

Beef offal ✓ ✓ ✓ ✓ ✓

Processed beef ✓ 

Pork (a

) ✓ ✓ ✓ ✓

Pork offal (a

) ✓ ✓ ✓ ✓

Processed pork (a

) ✓

Poultry, whole birds ✓ ✓ ✓ ✓

Poultry, pieces and offal ✓ ✓ ✓ ✓

Preserved poultry ✓ ✓ 

Soybeans 

Soybean meal 

Soybean oil 

Source: Compiled by USITC staff. 

 aProduct was not included in the simulation analysis because a representative positive tariff equivalent of a known 

NTM could not be calculated. 

and the product and market combinations where USITC staff research determined a 

policy affected exports from any supplier.10 

Estimation of Nontariff Measure Price Gaps 

The quantification of NTMs using the method of price gaps, or “tariff equivalents,” has 

been frequently used in Commission studies on NTMs.11 The NTM analysis in this study 

estimates supplier-specific gaps that allow for both quality differences and the possibility 

that the NTMs may have a greater or lesser impact on prices for imports from different 

sources.12 Separate price gaps are estimated for imports from the United States, imports 

from Brazil and imports from the rest of the world, by comparing the price in each 

market of an imported variety (i.e., a good from a particular source) with the price of that 

 10 In some cases, staff research indicated the presence of a trade-restricting policy; however, a positive 

tariff equivalent could not be calculated, and the product was excluded from the simulation analysis. This is 

true of pork imports from all suppliers into China and poultry imports from certain suppliers into China. For 

an analysis of Chinese NTMs affecting U.S. exports of pork and poultry products, see USITC, China’s 

Agricultural Trade, March 2011. 11 For the foundations of the method for estimating price gaps for NTMs at the Commission, see 

Linkins and Arce, “Estimating Tariff Equivalents of Non-Tariff Barriers,” August 2002. For further 

descriptions of the price-gap method, as well as literature reviews, see Deardorff and Stern, Measurement of 

Non-Tariff Barriers, 1998; Ferrantino, “Quantifying the Trade and Economic Effects of Nontariff Measures,” 

January 2006. 12 In general, it is not feasible to correct for all possible quality differences while estimating NTM price 

gaps because some of these differences are unobservable. Certain countries consistently export products at 

higher unit values than other countries, however, suggesting a quality difference, particularly for relatively 

homogeneous goods. The methods used in this study exploit the observed quality differences arising from 

differences in exporter-specific unit values. 
E-10 

same variety in the world market.13 The effects of removing these tariff equivalents are 

then analyzed using an AGE modeling framework. Table E.5 presents the estimated tariff 

equivalents. 

TABLE E.5 Estimated ad valorem equivalents of known NTMs

 Third-country Market 

Product Exporter China EU-27 Japan Korea Russia

Wheat 

USA 46 (

a

) 40 30 (

a

)

Brazil 1 (

a

) 2 1 (

a

)

Other (b

) (

a

) 46 18 (

a

)

Corn 

USA 157 116 21 (

a

) (

a

)

Brazil 29 19 9 (

a

) (

a

)

Other 11 12 22 (

a

) (

a

)

Beef meat 

USA 44 118 23 8 23

Brazil 3 101 9 12 6

Other 12 38 (

a

) (

a

) 9

Beef offal 

USA 93 61 (

a

) 14 34

Brazil 35 148 12 27 23

Other 25 (

a

) 200 (

a

) 19

USA (a

) 118c

 (a) (a) (

a

)

Processed beef Brazil (a

) (

a

) (a) (a) (

a

)

Other (a

) (

a

) (a) (a) (

a

)

Pork 

USA (b

) (

a

) (

a

) (

a

) 15

Brazil (

b

) 66d 101d 70d

32

Other (

b

) (

a

) (

a

) (

a

) 11

Pork offal 

USA (

b

) (

a

) (

a

) (

a

) 9

Brazil (

b

) 66d 101d 70d

33

Other (

b

) (

a

) (

a

) (

a

) (

b

)

Processed pork 

USA (

b

) (

a

) (

a

) (

a

) 63

Brazil (

b

) (

a

) (

a

) (

a

) 24

Other (

b

) (

a

) (

a

) (

a

) 7

Poultry, whole birds 

USA 112 16 107 (

a

) 34

Brazil 85 118 (

a

) (

a

) 73

Other (b

) 19 107 (

a

) 15

Poultry, pieces and offal 

USA 18 69 63 (

a

) 1

Brazil (

b

) 24 (

a

) (

a

) 12

Other (

b

) 35 84 (

a

) (

a

)

Preserved poultry 

 

USA 207 16 (

a

) (

a

) (

e

)

Brazil 62 29 (

a

) (

a

) (

a

)

Other 120 16 (

a

) (

a

) (

a

)

Source: USITC staff estimates. 

a

Staff research indicated no known trade-restricting NTM. 

b

Products were not included in the simulation analysis, although staff research indicated the presence of a trade-restricting 

NTM, because a representative positive tariff equivalent of the trade restrictiveness of the NTM could not be calculated. cStaff research indicated that EU-27 imports of beef meat, beef offal, and processed beef from the U.S. are subject to the same 

NTMs. Because the U.S. is not a large exporter of processed beef, a representative price gap could not be calculated and the 

calculated price gap for U.S. beef meat exports to the EU-27 was used. d

The estimated NTM AVEs for Brazilian pork meat and pork offal are approximately equal within each market. Since the NTMs 

facing these imports are the same, same estimates were used for pork meat and pork offal within each market. eBecause known NTMs affect U.S. exports of prepared poultry to Russia indirectly and might not have a substantial traderestricting effect, the estimated ad valorem equivalent of the known NTM was excluded from the analysis. 

 13 This estimation procedure is similar to that used in recent Commission studies. See USITC, India: 

Effects of Tariff and Nontariff Measures on U.S. Agricultural Exports, November 2009; USITC, China’s 

Agricultural Trade: Competitive Conditions and Effects on U.S. Exports, March 2011. 
E-11 

The estimation procedure uses unit values or “average prices” information from both 

bilateral and global trade statistics to estimate price gaps for meat, grain and oilseed 

products at the HS-6 subheading level. For U.S. goods, price gaps for each market are 

estimated by comparing unit values obtained from imports from the U.S. on a cost, 

insurance, and freight (c.i.f.) basis with unit values obtained from U.S. exports to the 

world on a free on board (f.o.b.) basis. These U.S. price gaps are adjusted for 

transportation costs, with transportation margins obtained from the Organisation for 

Economic Co-operation and Development (OECD) Maritime Transport Costs dataset, 

and represent transportation margins for U.S. exports to a specific market at the HS-6 

subheading level. When transportation margins from the OECD dataset were not 

available, margins were obtained from the GTAP database at the GTAP sector level. For 

Brazilian goods, price gaps are estimated using a similar method. 

Price gaps for imports into each market of non-U.S. or Brazilian goods are estimated in a 

similar fashion for each supplier, by comparing c.i.f. unit values by supplier in each focus 

market with the various suppliers’ f.o.b. unit values to the world. These non-U.S., 

supplier-specific gaps are then aggregated into a price gap for “other suppliers” for each 

good. This aggregation uses quantities imported into each market by supplier as weights, 

to adjust for systematic quality differences among different suppliers. The price gaps for 

other suppliers were adjusted for transportation costs by using transportation margin 

information obtained from the OECD Maritime Transport Costs dataset, where available, 

or else the GTAP database. 

Import and export statistics at the HS-6 level were taken from the UN Comtrade 

database.14 The analysis considered price data for the three most recent years for which 

data are available (2007–09) to account for variable effects of NTMs under different 

market conditions. Price gap estimates at the HS-6 level were aggregated to the 14 

product categories representing meat, grain, and oilseed products (table E.4). Either the 

mean price gap for the three years or the most representative price gap out of these, based 

on available industry information, was used as the estimate. Because unit values may 

capture the effects of various domestic and world market conditions not related to NTMs, 

the tariff equivalent price gaps are not associated with any particular policy and should be 

thought of as an upper bound estimate of the price effects of NTMs in the importing 

country. 

Negligible Trade and Quantity Gaps 

The NTM analysis considered the possibility that some measures might prohibit U.S. and 

Brazilian agricultural exports to the selected third-country markets completely or almost 

completely over the period considered. For these products, obtaining a price of imports 

on which to base price gaps was impossible, or at best problematic. In cases of negligible 

trade, price effects were estimated indirectly from the quantity gap between the supplier’s 

share of imports and the supplier’s share of world imports, using available import 

 14 Certain HS-6 trade observations that presented data difficulties were excluded. These difficulties 

included, inter alia, nonstandard units of measurement and thinly traded products exported from small 

countries, for which a reference price could not be established. The standard unit of measurement for almost 

all agricultural products is the kilogram or the metric ton. 
E-12 

demand elasticities.15 These price effects are also analyzed as tariff equivalents, and their 

removal are analyzed in the described AGE model framework. 

Model Limitations 

Simulated effects from this simulation model are based on established trade patterns 

which may exist for such reasons as the distance between countries and the presence or 

absence of transport infrastructure. These factors are imperfectly captured by the 

simulation model. Furthermore, the model does not directly account for historical or 

cultural factors as determinants of trade patterns. The model assumes that these factors 

are unaffected by the simulated changes. 

Economic models capture the most important factors for the question under 

consideration: existing trade flows and trade policies, and the degree to which consumer 

demand is sensitive to price changes. However, economic models are limited in their 

ability to reflect the degree of complexity evident in the real world.16 Despite these 

limitations, the simulations performed here can be quite useful in providing insights on 

the effects of economic policies. The model presents a unified framework in which the 

likely effects of the policy can be assessed. 

 

 15 Import demand elasticities at the HS-6 level were taken from Kee et al., “Import Demand Elasticities,” 

2008. 16 Examples of real-world complexities that are difficult to reflect in the model include the changing 

relative growth of different economies; politically motivated, export-oriented investment; relationships 

between multinational subsidiaries that influence trade patterns; and such events as catastrophic weather or 

violence that are inherently unpredictable (at least in their details). 
E-13 

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